5) You are considering buying some lawn care equipment to do yard work in Stillwater to pay for college. You are projecting that you can earn the following amounts of profit after paying operating expenses: $3500 next month and $3100 the following month. Then you will take the winter off and start back up again next spring, when you hope to earn $3600 6 months from now, $3800 7 months from now, and $4200 8 months from now, after which you will leave Stillwater to for full time employment elsewhere. (Discount the first $3500 1 month, the $3100 2 months, etc.) Use a discount rate of 6.5% per year. Show all work below.

a. What is the present value of this cash flow (show hand algebraic calculations)?

b. What is the value of the cash flow (from the lawn equipment problem) if you do not discount the numbers?

c. Could you use a PMT formula to solve this problem? Why, or why not?

d. Describe (in words) how you could use Excel to create a template that could be used to solve problems such as the one described in number 5 if the numbers or interest rate were different for each specific situation.