**Present Value of Annuity**

To calculate the present value of an annuity, we need to determine the value of a series of equal cash flows occurring at regular intervals in the future. In this case, we have an annuity of Rs 5000 per year for 12 years.

**Formula to Calculate Present Value of Annuity**

The formula to calculate the present value of an annuity is:

PV = C * [(1 - (1 + r)^(-n)) / r]

Where:
PV = Present Value of Annuity
C = Cash flow per period
r = Interest rate per period
n = Number of periods

**Given Data**

Cash flow per period (C) = Rs 5000
Interest rate per period (r) = 4% or 0.04 (annually)
Number of periods (n) = 12 years

**Calculating Present Value of Annuity**

Using the formula mentioned above, we can calculate the present value of the annuity as follows:

PV = 5000 * [(1 - (1 + 0.04)^(-12)) / 0.04]

PV = 5000 * [(1 - 1.601031) / 0.04]

PV = 5000 * (0.398969 / 0.04)

PV = 5000 * 9.97423

PV = Rs 49,871.15

Therefore, the present value of the annuity of Rs 5000 per year for 12 years at an annual compound interest rate of 4% is Rs 49,871.15.

**Explanation**

The present value of an annuity is the current value of a series of future cash flows discounted at a specific interest rate. In this case, the cash flows of Rs 5000 per year for 12 years are discounted at an interest rate of 4% per year.

The formula for calculating the present value of an annuity calculates the sum of the present values of each individual cash flow, taking into account the time value of money. By discounting each cash flow back to the present, we determine the amount that is equivalent to the annuity.

In this scenario, the present value of the annuity is calculated to be Rs 49,871.15. This means that if we were to receive Rs 5000 per year for 12 years and discount it at a rate of 4% per year, the equivalent present value of those cash flows would be Rs 49,871.15.

Understanding the present value of an annuity is important in financial decision-making, as it helps in evaluating the worth of future cash flows in terms of their present value.