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Unformatted text preview: (1) or $50,000 per year forever. Which is better in terms of present value? 3. What if the stream of payments in part (2) only lasted 30 years instead of forever. What has the highest present value then? Hint: there is an easier way to solve this problem than adding up the present values of 30 payments one at a time Suppose a car costs $20,000 in period 0, requires $1,000 of fuel in each of years 1-5 and is sold at the end of year 5 for $12,000. If the interest rate is 5%, what is the net present value of owning and driving the car?...
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- Spring '08