Question
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Lincoln Memorial hospital has just been informed that private donor is willing to contribute $5 million per year at the beginning of each year for fifteen years. What is the current dollar value of this contribution if the discount rate is 9 percent?
Lincoln Memorial hospital has just been informed that private donor is willing to contribute $5 million per year at the beginning of each year for fifteen years. What is the current dollar value of this contribution if the discount rate is 9 percent?
Answers
Ms. Sue
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Reiny
The standard present value of an annuity formula assumes that the payment is made at the end of a period, yours is made at the beginning, so
PV = 5million + 5million( 1 - 1.09)^-14)/.09
= $ 43,930,751.94
notice the first term is 5 million, plus I added the other 14 payments.
PV = 5million + 5million( 1 - 1.09)^-14)/.09
= $ 43,930,751.94
notice the first term is 5 million, plus I added the other 14 payments.