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You have just turned 27 and may now spend a portion of the trust fund your parents established for you. The terms of the trust fund allow you to withdraw 50 beginning−of−the−year cash flows of​ $40,000 each. An investment firm has offered to pay you cash for all of the fund today. If the rate they use to discount the cash flows is​ 14% per​ year, what is their offer price today for your pension​ fund?

Respuesta :

Answer:

the present value is $325,249.13

Explanation:

The computation of the offer price today is given below:

It means we have to measure the present value

Given that

RATE is 14%

NPER is 50

PMT is $40,000

FV is $0

The formula is given below:

=-PV(RATE,NPER,PMT,FV,PV,TYPE)

After applying the above formula, the present value is $325,249.13

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Tundexi

The offer price today of the pension​ fund will be $325,249.13.

Given information

RATE is 14%

NPER is 50

PMT is $40,000

FV is $0

Present value = -PV(RATE,NPER,PMT,FV,PV,TYPE)

Present value = -PV(14%, 50. 40000, 0)

Present value = -$325,249.13

In conclusion, the offer price today of the pension​ fund will be $325,249.13.

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