Question

Huggins Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 880 2 1,250 3 1,510 4 1,675 If the discount rate is 8 percent, what is the present value of these cash flows

Answer 1

the present value is $4,316.35

Step-by-step explanation:

The computation of the present value of given cash flows is shown below:

Present value is

= Cash flows at year 1 ÷ (1 + rate of interest) + Cash flows at year 2 ÷ (1 + rate of interest)^2 + Cash flows at year 3 ÷ (1 + rate of interest)^3 + Cash flows at year 4 ÷ (1 + rate of interest)^4

= $880 ÷ 1.08 + $1,250 ÷ 1.08^2 + $1,510 ÷ 1.08^3 + $1,675 ÷ 1..08^4

= $4,316.35

Hence, the present value is $4,316.35