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Intro It is the end of 2019. You (foolishly) played the lottery and won the following...

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Finance

Intro It is the end of 2019. You (foolishly) played the lotteryand won the following cash flows, to be paid at the end of eachyear:

Year 2020 2021 2022 2023 2024

Cash flow 1,300 1,600 1,800 2,000 2,200

The appropriate interest rate is 11%.

What is the sum of present values?

Now assume that the interest rate is 9%. What is the presentvalue of all cash flows?

Now assume that the interest rate is 15%. What is the presentvalue of all cash flows?

Answer & Explanation Solved by verified expert
3.9 Ratings (440 Votes)
Present Value of the cash flows if the interest rate is 11 Year Annual Cash Flow Present Value factor at 11 Present Value of Cash Flow 2020 1300 0900901 117117 2021 1600 0811622 129860 2022 1800 0731191 131614 2023    See Answer
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Transcribed Image Text

Intro It is the end of 2019. You (foolishly) played the lotteryand won the following cash flows, to be paid at the end of eachyear:Year 2020 2021 2022 2023 2024Cash flow 1,300 1,600 1,800 2,000 2,200The appropriate interest rate is 11%.What is the sum of present values?Now assume that the interest rate is 9%. What is the presentvalue of all cash flows?Now assume that the interest rate is 15%. What is the presentvalue of all cash flows?

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