Use Excel Spreadsheet
A college signed a new five-year concessions contract under which they will receive $1M each year for the first two years, $1.2M each year for the second two years and $1.5M for the final year of the contract. What is the present value of the total deal if payments are discounted at 6%
a. Although we have a series of payments, they are not equal, so we can’t use the present value of an annuity function. Instead, we need to calculate the present value of each payment (using 6% discount rate and the year the payment is made [1-5]) and then we need to sum all the present values.