# 1. A Firm Is Expected To Earn \$10,000, \$25,000, \$48,000, And \$75,000 During The Next Four Years, After Which It Will Be Dissolved. What Is The Present Value Of The Firm If The Discount Rate Is 8%?

## 1 Answers

Ellie Hoe answered
Interest rate = 8%
1st year earnings = 10,000
2nd year earnings = 25,000
3rd year earnings = 48,000
4th year earnings = 75,000

Find the present value of each earnings you will get

Present values of 1st earning = A/(1+I)^n
= 10000/(1+.08)
= 9259.259

Present values of 2nd earning = A/(1+I)^n
= 25000/(1+.08)^2
= 25000/ 1.1664
= 21433.471

Present values of 3rd earning = A/(1+I)^n
= 48000/(1+.08)^3
= 48000/ 1.259712
=38103.948

Present values of 4th earning = A/(1+I)^n
= 75000/(1+.08)^4
= 75000/1.36048896
= 55127.239

Total Present value = Present values of 1st earning+Present values of 2nd earning+Present values of 3rd earning+Present values of 4th earning
= 9259.259 + 21433.471+ 38103.948 + 55127.239

Present Value = 123923.917 >>>Answer

thanked the writer.

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