Question Completion:
Year 1 2 3 4 5 6 7
$241,000 $291,000 $316,000 $341,000 $391,000 $441,000 $591,000
Present value of investment$
Answer:
Maria Miller
The lump sum collection by Maria Miller should be:
= $1,738,016.85
Explanation:
a) Data and Calculations:
Cash flows from year 1 to year 7:
Future Value Present Value
Year 1 $241,000 $219,490.04
Year 2 $291,000 241,372.92
Year 3 $316,000 238,715.06
Year 4 $341,000 234,609.12
Year 5 $391,000 244,999.21
Year 6 $441,000 251,665.93
Year 7 $591,000 307,164.57
Total $2,612,000 $1,738,016.85
b) The amount that Maria Miller should request today for her annual cash flows at 9.8% interest annually should be $1,738,016.85. This is the present value of the future cash flows. The above present values of the cash flows were obtained using an online calculator.
