Answer:
$12,489.70
$492,448.47
Explanation:
We are to calculate the future value of the 5-year annuity
Future value = Amount x annuity factor
annuity factor = {[(1+r)^n] - 1} / r
r = interest rate
n = number of years
2400 x[ (1.02)^5 - 1] / 0.02 = $12,489.70
b. We are to calculate the present value of the 30-year annuity
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Cash flow each year from year 1 to 30 = $75,000
I = 15%
PV = $492,448.47
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute