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# Time Value of Money

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1) Dr. Oats, a nutrition professor, invests \$80,000 in a piece of land that is expected to increase in value by 14 percent per year for the next five years. She will then take the the proceeds and provide herself with a 10- year annuity. Assuming a 14% interest rate for the annuity how much will this be?

2) I have a contract in which I will receive the following payments for the next five years: \$3000, \$4000, \$5000, \$6000, and \$7000. Then I will receive an annuity of \$9000 a year from the end of the sixth through the end of the 15th year. The discount rate is 13%. If I am offered \$40,000 to cancel the contract should I ?

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1) Dr. Oats, a nutrition professor, invests \$80,000 in a piece of land that is expected to increase in value by 14 percent per year for the next five years. She will then take the the proceeds and provide herself with a 10- year annuity. Assuming a 14% interest rate for the annuity how much will this be?

Step 1: Calculate the Future Value of the piece of land at the end of 5 years

n= 5
r= 14.00%
FVIF (5 periods, 14.% rate ) = 1.925415

Present value= \$80,000
Therefore, future ...

#### Solution Summary

Time Value of Money calculations
1) Calculation of Future Value and Annuity
2) Calculation of Present Value of Cash flows

\$2.49