Present Value
Inputs
Single Cash Flow
$50,000.00
Discount Rate / Period
8.0%
Number of Periods
4
Present Value using the Formula
Present Value
$36,751.49
Present Value using the PV Function
Present Value
($36,751.49)
S
INGLE
C
ASH
F
LOW
Problem:
Your company has told you that you if you remain employed with them, you will
receive a $50,000 bonus four years from today.
Assume a discount rate of 8%.
Fill in this
spreadsheet, calculating the present value in two different ways.
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Inputs
Payment
$1,000,000
Discount Rate / Period
5.16%
Number of Periods
30
Annuity Present Value using a Time Line
Period
0
1
2
3
4
5
6
7
Cash Flows
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
Present Value of Each Cash Flow
1,000,000
950,953
904,312
859,958
817,780
777,670
739,528
703,256
Present Value
$16,100,000
Annuity Present Value using the PV Function
Present Value
($16,100,000)
Compare PV to:
Lump sum option
$16,100,000
Difference (Annuity PV  Lump sum)
($0)
A
NNUITY
Problem:
Kenny Dukes, Lottery Winner.
Refer to the 1st newspaper article to answer the questions.
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 Fall '10
 ToddMitton
 Management, Time Value Of Money, Net Present Value, Internal rate of return

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