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Derive (2) from (1). Please Explain The original equations for (Net) Present Value of all streams of even cash flows: NPV = CF_0 + CF_1/(1
Derive (2) from (1). Please Explain
The original equations for (Net) Present Value of all streams of even cash flows: NPV = CF_0 + CF_1/(1 + r)^1 + CF_2/(1 + r)^2 +...+ CF_N/(1 + r)^N +... NPV = (PMT) + PMT/(1 + r)^1 + PMT/(1 + r)^2 +...+ PMT/(1 + r)^N +... However, we have "short-cut" formulas for cash flow streams with even cash flows of equal amounts: Annuity of N payments in N years happening at the end of each year PV (Annuity) = PMT * [1/r - 1/r*(1+r)^N] or PV (Annuity) = PMT/r * [(1 + r)^N - 1] Step by Step Solution
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