what is the present value of $2500 per year for 9 years discounted back to the present at 11 percent?
P=FV/(1+.11)^9
P=2500/(1.11)^9
P=$977.31
That answer is way off, grow up!
To calculate the present value of $2500 per year for 9 years discounted back to the present at 11 percent, you can use the formula for the present value of an ordinary annuity.
The formula is: PV = C * ((1 - (1 + r)^(-n)) / r)
PV = Present Value
C = Cash flow per period
r = Interest rate per period
n = Number of periods
In this case:
C = $2500
r = 11% or 0.11 (decimal form)
n = 9
Using the formula, the calculation would be as follows:
PV = $2500 * ((1 - (1 + 0.11)^(-9)) / 0.11)
PV = $2500 * ((1 - (1.11)^(-9)) / 0.11)
PV = $2500 * ((1 - 0.3505) / 0.11)
PV = $2500 * (0.6495 / 0.11)
PV = $2500 * 5.9045
PV = $14,761.25 (rounded to the nearest cent)
Therefore, the present value of receiving $2500 per year for 9 years discounted back to the present at 11 percent is approximately $14,761.25.
To calculate the present value of a cash flow, you need to use the present value formula. The present value (PV) of a future cash flow is determined by discounting it back to the present using a discount rate.
The formula to calculate the present value is:
PV = CF / (1 + r)^n
Where:
PV = Present Value
CF = Cash Flow
r = Discount Rate
n = Number of Years
In this case, you have a cash flow of $2500 per year for 9 years, and the discount rate is 11 percent.
To calculate the present value, you can plug in the values into the formula:
PV = $2500 / (1 + 0.11)^9
Now, let's calculate it step by step:
Step 1: Add 1 to the discount rate:
1 + 0.11 = 1.11
Step 2: Raise the result to the power of the number of years:
1.11^9 = 2.853116706
Step 3: Divide the cash flow by the previous result:
$2500 / 2.853116706 = $875.09 (rounded to two decimal places)
Therefore, the present value of receiving $2500 per year for 9 years, discounted back to the present at a rate of 11 percent, is approximately $875.09.