Wednesday
April 16, 2014

Homework Help: calculating annuity

Posted by Ms. Renee on Tuesday, July 11, 2006 at 11:49pm.

IF a company will generate 80,000 in annual revenue each year for the next eight years and the interest rate is 8.2% what is the present value of the savings?


An EXCEL spreadsheet will be helpful for these types of calculations.

Let S1 be savings in year 1, S2 in year 2, and so on. (For now, unless you have been othewise instructed, assume annual savings is received on the last day of the year.) Let r be the interest rate.

First, calculate the nominal amount of cash that will be there after 8 years.
T = S1*(1+r)^7 + S2*(1+r)^6 ... S8(1+r)^0
Now deflate T by 8 years of annual discounting at rate d. PV = T/(1+d)^8 Since you did'nt specifiy a discount rate d, assume d=r.




Thanks! That is much easier!

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

math - find the present value of ordinary annuity payments of 890 each year for ...
Personal Finance - NEED HELP IMMEDIATELY, HAVE UNTIL 10P.M. CENTRAL TO HAVE ...
finances - Calculate the future value of the following: o $5,000 compounded ...
Finance - What is the present value (or purchase price) of an annuity product ...
business math - If Naomi decides that she will invest $3,000 per year in a 6% ...
Fianacial Management in Health Care Organizations - Resource: Ch. 5 of Financial...
fin534 - In order to expand its business, Auto Parts Distributing, Inc., is ...
Finance - Suppose you just inherited a gold mine. This gold mine is believed to ...
Math - Compare the results of the present value of a $6,000 ordinary annuity at ...
Math - Amy Powell invested $8500 twice a year in an ordinary annuity at New York...

Search
Members