Problem: Morgan & Morgan are trying to finance their new office building. ABC Bank wants to present them a creative financing option. The loan is payable each year for 7 years. The payments are as follows:
Year 1: $10,000
Year 2: $20,000
Year 3: $35,000
Year 4: $50,000
Year 5: $65,000
Year 6: $70,000
Year 7: $100,000
What is the present value of all the future payments if you used an interest rate of 8%?
What would the value be of the loan was a variable rate and it changes to 10% in year 5?