What is the worth of the fifth payment in present dollars

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Reference no: EM131052299

You just signed a business consulting contract with one of your clients. The client will pay you $50,000 a year for five years for the service you will provide over this period. You anticipate the general inflation rate over this period to be 6%. If you desired inflation-free interest rate (real interest rate) is to be 4%, what is the worth of the fifth payment in present dollars? The client will pay the consulting fee at the end of the year. The answers are the investment is 0.1024 and P (present dollars) is $41,096. Can someone please tell me how they got this answers.

Reference no: EM131052299

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