What is the value today of a money machine that will pay $2,655.00 every six months for 27.00 years? Assume the first payment is made six months from today and the interest rate is 13.00%

Present value is $74,116.62

Explanation:

Giving the following information:

The machine pays = $2,655.00 every six months

n = 27 years = 54 semesters

Interest rate = 0.13/2 = 0.065

First, we need to calculate the final value using the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual pay

FV = {2,655*[ (1.065^54) - 1]}/0.065 = $1,183,854.61

Now, we can calculate the present value using the following formula:

PV = FV / (1+i) ^n

PV = 1,183,854.61 / (1.065) ^44 = $74,116.62