Friday
March 24, 2017

Post a New Question

Posted by on Saturday, August 3, 2013 at 5:46am.

Lincoln Memorial hospital has just been informed that private donor is willing to contribute $5 million per year at the beginning of each year for fifteen years. What is the current dollar value of this contribution if the discount rate is 9 percent?

  • Math - , Saturday, August 3, 2013 at 9:27am

    We have two main annuity formulas

    1. PV of annuity = payment [ 1 - (1+i)^-n ]/i
    and
    2. Amount of annutiy = payment [ (1+i)^n - 1 ]/i

    both of these assume that the payments are made at the end of each interest period.
    So for this question, we have to separate the first payment from the remaining 14.

    PV = 5 million + 5million( 1 - 1.09^-14)/.09
    = 5 million + 5million( 7.78615...)
    = $43,930,751.94

Answer This Question

First Name:
School Subject:
Answer:

Related Questions

More Related Questions

Post a New Question