You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you 533,000 today, plus 533,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 7 percent, what is the present value of the cash flow stream that the company is offering you? (Round answer to the nearest whole dollar, e.g. 5,275.)

ANSWER

The first 547,000 received today is its PV.

Add to it the PV of an Annuity of 547,000, N 6, R 8%, which is

2,528,715. Total PV 3,075,715.