1 What is the present worth of a cash flow where you gain 20

1) What is the present worth of a cash flow where you gain $20 from time period 8 through time period 30 when the interest rate is 0%?

2) What is the present worth of a cash flow where you gain $20 from time period 8 through time period 30 when the interest rate is 0%?

Please post a step by step solution as you walk through these.

Solution

ANSWER:

A 0% interest rate mean that there are no investment opportunities, which means no matter how much money one invests there will be zero return, therefore the value of money 30 years later or anytime in future would be the same as today.

So, the present value of $20 invested each year from year 8 to year 30 will be = 23*20 = $460.