Three years from now you will begin receiving annual payments of? $7,200. this will continue for 14 years. at a discount rate of? 5.8%, what is the present value of this stream of cash? flows?

The cash flow is considered to be a deferred one because the annual payments is made on a later date. The formula for finding the present value (PV) of a deferred annuity is given as:

 PV of annuity = A * ((1 - (1 + i)^-n)/ i) (1 + i)^-k

Where,

A = annual payments = 7,200

i = interest rate = 5.8% = 0.058

n = number of years = 14

k = deferred years = 3

Substituting the given values into the formula:

PV = 7,200 * [(1 – (1 + 0.058)^-14) / 0.058] (1 + i)^-3

PV = 57,216.29

Therefore the present value is about $57,216.29

answer; hazards;

answer; rapid growth in buyer demand and high buyer switching cost;