Share
Explore BrainMass

present value

I am asking for help with understanding the processes to analyze a present value question, for example below. Any assistance is appreciated.

I just inherited profits. The profit is believed to have 3yrs worth of profit deposit. Here is how much income this profits is projected to bring each year for the next 3yrs:

Year 1: 42,000,000

Year 2: $62,000,000

Year 3: $99,000,000

If I compute the present value of this stream of income at a discount rate of 8%. If I calculate the present value for whole stream income. ex: the total value of receiving all three payments ( how much would I pay right now to receive these three payments in the future).

Now I need to compute the present value of the income stream from the profits at a discount rate of 6%, and at a discount rate of 4%

Solution Preview

I just inherited profits. The profit is believed to have 3yrs worth of profit deposit. Here is how much income this profits is projected to bring each year for the next 3yrs:

Year 1: $42,000,000

Year 2: $62,000,000

Year 3: $99,000,000

If I compute the present value ...

Solution Summary

This solution is comprised of a detailed explanation to compute the present value of the income stream from the profits at a discount rate of 6%.

$2.19