Answer:
Present value of an annuity of $5,900 per year is $52,460
Explanation:
This question will be solved using Advanced Annuity formula as below:
Value of Annuity three years from now = [tex]P+P [\frac{1-(1+r)^{-(n-1)} }{r}][/tex]
Value of Annuity three years from now = [tex]5900+5900 [\frac{1-(1+0.08)^{-22} }{0.08}][/tex]
Value of Annuity three years from now = [tex]5900+(5900 X{10.53})[/tex]
Value of Annuity three years from now =5,900 + 60,184
Value of Annuity three years from now = 66,084
Present Value of annuity = 66,084 x [tex](1+0.08)^{-3}[/tex]
Present Value of annuity = 66,084 x 0.79383
Present Value of annuity = $52,460
So the Present value of an annuity of $5,900 per year is $52,460 if the first cash flow received three years from now
