Answer:
PV= $393.65
Explanation:
Giving the following information:
Cash flow= $150
Number of periods= 3 years
Interest rate= 7%
To calculate the present value of the annuity, first, we need to determine the future value:
FV= {A*[(1+i)^n-1]}/i
A= annual cash flow
FV= {150*[(1.07^3) - 1]} / 0.07
FV= $482.24
Now, the present value:
PV= FV/(1+i)^n
PV= 482.24/1.07^3
PV= $393.65
