Answer:
PV= $3,634,716.01
Explanation:
Giving the following information:
Cash flow= $560,000
Number of years= 26
Interest rate= 11%
growth rate= 4%
First, we will determine the final value. We will include the growth rate to the interest rate. We need to use the following formula.
FV= {A*[(1+i)^n-1]}/i
A= annual cash
FV= {560,000*[(1.15^26)-1]}/ 0.15
FV= $137,598,703.2
Now, the present value:
PV= FV/(1+i){ n
PV= 137,598,703.2/(1.15^26)
PV= $3,634,716.01
