Discounted values and discount rates

Economics
Tutor: None Selected Time limit: 1 Day

Consider a project with costs of $10 million per year for 10 years. Assuming that the costs are paid the last day of each year, the present discounted value of these costs, using a 5% discount rate is?

Jul 20th, 2015

Thank you for the opportunity to help you with your question!

Given -

Annual cost (Annuity) = $10 million

Time period = 10 years

Discount rate = 5%

Payments are made at the end of each year means it is an ordinary annuity.

Present value interest factor of annuity (5%, 10 years) = 7.7217 .........(either use PV table or online calculator to find this value)

Thus, present discounted value of $10 million annual payment is = $10 million * 7.7217

                          = $77.217 million  (Answer)

Please let me know if you need any clarification. I'm always happy to answer your questions. Kindly best this answer if it has helped you.
Jul 20th, 2015

Studypool's Notebank makes it easy to buy and sell old notes, study guides, reviews, etc.
Click to visit
The Notebank
...
Jul 20th, 2015
...
Jul 20th, 2015
Dec 4th, 2016
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer