Suppose you are going to receive 14000 per year for 7 years

Suppose you are going to receive $14,000 per year for 7 years at the beginning of each year; thus you receive the first payment today. Compute the present value of the cash flows if the appropriate interest rate is 11 percent. Round it two decimal places, and do not include the $ sign, e.g., 123456.78.

(If there is a way to do this on a financial calculator, please share!)

Solution

Using formula:

Annual Payment = $14,000
Period = 7 years
Interest Rate = 11%

Present Value = $14,000 + $14,000/1.11 + $14,000/1.11^2 + ... + $14,000/1.11^6
Present Value = $14,000 * 1.11 * (1 - (1/1.11)^7) / 0.11
Present Value = $14,000 * 5.23054
Present Value = $73,227.56

Using financial calculator:

First set your financial calculator to BEGIN MODE, then use the following inputs:

N = 7
PMT = 14000
I/Y = 11%

PV = 73,227.53