FUTURE CASH INTANGIBLES The Present Value of Cash Flows Paid as an Annuity Introduction Calculate the present value of each of the following annuity amounts based on the reasonable interest rate that is specified and the number of time periods. Assume that the first payment is made immediately so that the cash payments create an annuity due. The backside of a dollar bill. Payment per Period Interest Rate Number of Periods Present Value $30,000 5% 8 years $60,000 4% 7 years $25,000 8% 10 years $56,000 6% 4 years Solution These present value amounts are determined as follows (rounded): --$30,000 x 6.78637 = $203,591 --$60,000 x 6.24214 = $374,528 --$25,000 x 7.24689 = $181,172 --$56,000 x 3.67301
