calculate the current market values of the following cash fl

calculate the current market values of the following cash flows streams at the given OOCs:

a. $60,000 received at the end of the current quarter, followed by quarterly cash flows at the same level until the end of year 5, OCC is 14% per year.

Solution

OCC of 14% per year = (14/4) or 3.5% per quarter

Number of quarters = 5 x 4 = 20

Current market value = $60,000 x Present Value interest factor of annuity, PVIFA (3.5% x 20 periods)

= $60,000 x 14.2124 [From PVIFA calculator]

= $852,744