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Annuity factors are the value of $1 per annum at a discount rate of x% for each year from year 1 to year n.
Can you explain this professor?
If you were going to receive $250 at times 1, 2, 3, 4 and 5 and the discount rate is 8%, then the NPV of that stream of income is:
250 x 5 year, 8% annuity factor = 250 x 3.993 = 998.25
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