Explore BrainMass

Explore BrainMass

    Difference in the Present Value

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    You are scheduled to receive annual payments of $15,000 for each of the next 13 years. The discount rate is 9 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of each year?

    © BrainMass Inc. brainmass.com June 3, 2020, 9:15 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/difference-present-value-172965

    Solution Preview

    Let us find out the present value in each of the cases

    If the amount is received at the end
    P=A*((1/r)-((1/(r*((1+r)^n)))
    P=present value, A= Annuity ...

    Solution Summary

    This solution calculates the difference in the present value when one receives payments at the beginning of each year rather than the end of the year based on a 9 percent discount rate.

    $2.19

    ADVERTISEMENT