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Unformatted text preview: • While we just demonstrated the differences between the timing of payments, from this point forward, assume that the first payment occurs one period from the present ( at the end of the each period ), unless specifically stated 5 One More Before We Move On • How much is the following investment worth? – A promised return of 11% and three, $5,000 payments beginning at the end of the fourth year and paid consecutively thereafter. • Draw the timeline and using your calculator, calculate: 6 Present Value 7 r = .11 $3,293.65 $2,673.20 $2,967.26 $8,934.11 0 1 2 3 4 5 6 $5,000 $5,000 $5,000 $5,000/(1.11)4 $5,000/(1.11)5 $5,000/(1.11)6 Future Value In Six Years 8 $6,160.50 $5,000.00 $5,550.00 $16,710.50 0 1 2 3 4 5 6 $5,000 $5,000 $5,000 $5,000(1.11)2 $5,000(1.11)1 $5,000 r = .11 Compare The Results • What’s the relationship between: – PV = $ 8,934.11 – FV = $16,710.50 • What is the FV of $8,934.11 in 6 years at 11%? 9...
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 Spring '12
 VictorWakeling
 Net Present Value

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