- +1-530-264-8006
- info@tutorsglobe.com

Present value of growing annuity versus ordinary annuity

Problem:

The city of Cincinnati gave up the right to collect parking fees over a 30-year period in exchange for a lump sum of $92 million plus a 30-year annuity of $3 million. Suppose that if the city had not entered into that arrangement, it would have collected parking fees the following year of $6 million (net of operating costs), and those fees would have grown at a steady 3% for the next 30 years. At an interest rate of 4%, what is the present value of the parking revenue that the city could have collected? Using the same 4% to value the payments that the city was set to receive in their privatization deal, do you think that the city made the correct decision? Why or why not?

Now Priced at $25 (50% Discount)

Recommended **(90%)**

18,76,764

Questions

Asked

21,311

Experts

9,67,568

Questions

Answered

Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

Submit Assignment2015 © Tutors Globe. All rights reserved.

## Q : Time value of money and rate of interest

What will be the value in 20 years of $5,000 contributed at the end of each year into an IRA (individual retirement account) which pays 8%?