Answer:
6291.26$
Explanation:
In order to calculate the present value of the cash flow, we apply the formula for the present value of annuity due:
[tex]PVA=P+\frac{P}{r}(1-\frac{1}{(1+r)^{n-1}})[/tex]
where:
P is the value of the periodic payment
r is the discout rate
n is the number of periods
In this problem, we have:
[tex]P=\$800[/tex] (periodic payment)
n = 11 y (number of years)
[tex]r=0.075[/tex] (discount rate is 7.5%)
Therefore, the present value of the cash flow is:
[tex]PVA=800+\frac{800}{0.075}(1-\frac{1}{(1+0.075)^{11-1}})=6291.26\$[/tex]
