To view a video of present value calculations, go to:

http://www.youtube.com/watch?v=2sXYobpdsUA

Also, view the calculations provided in the following example:

http://educ.jmu.edu/~drakepp/principles/module3/pvanex.html

Please answer questions below, based on the following facts:

If a production machine costs $18,000, and we are able to set up the following payment arrangements with the bank:

Number of payments = 4 (one at the end of each year) Interest Rate = 5% Amount of each annual payment = $5,000 Questions:

1. What is the present value of the stream of cash flows (the series of payments)?

2. Will we be provided with enough purchasing power at the present time to be able to

   purchase the machine?

3. What do you find difficult (if anything) about present value concepts? Did your

   background (economics, finance) help you understand current examples of present value

   issues?

4. Does the text do a reasonable job of explaining the role of present value in