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Lesson #12-Cap Sheet

# Table page 205 what is the present value of future

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Unformatted text preview: nt Value of future cash flows of \$1,000/year for four years, assuming interest rates =10%? This means how much \$\$ do you have to invest today, so that you will receive \$1,000 at the end of year 1, year 2, year 3 & year 4? Using Table on Page 205, look under the 10% column for 4 years and see the PV factor of 3.16987. This means that if you invest (\$1,000 x 3.16987) or \$3,169.87 today, you will be able to receive \$1,000/year for four years (like an annuity) Balance Balance today \$3,169.87 Year 1 interest (10% x \$3,169.87) \$316.99 \$3,486.86 Year 1 withdrawal -\$1,000.00 \$2,486.86 Year 2 interest (10% x \$2,486.86) \$248.69 \$2,735.54 Year 2 withdrawal -\$1,000.00 \$1,735.54 Year 3 interest (10% x \$1,735.54) \$173.55 \$1,909.10 Year 3 withdrawal -\$1,000.00 \$909.10 Year 4 interest (10% x \$909.10) \$90.91 \$1,000.01 Year 4 withdrawal -\$1,000.00 \$0.01...
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