What is the value today of receiving five annual payments of $500,000,beginning one year from now,assuming an 11% discount rate?
A)$2,500,000.
B)$2,225,000.
C)$1,847,950.
D)$2,115,270.

Question

Quizplus · Accepted Answer

The present value of an annuity can be calculated using the formula PV = PMT × [(1 - (1 + r)^-n) / r], where PMT is the payment amount, r is the discount rate, and n is the number of periods. Plugging in the values: PV = $500,000 × [(1 - (1 + 0.11)^-5) / 0.11] = $1,847,950.

What Is the Value Today of Receiving Five Annual Payments