Final answer:
The present value of the investment, using a discount rate of 10%, is $2856.44.
Step-by-step explanation:
The present value of an investment is the current worth of its future cash flows, discounted at an appropriate interest rate. To calculate the present value of the investment, we need to discount each cash flow to its present value and sum them up.
Using a discount rate of 10%, the present value of $1,000 received at the end of each of the next 2 years can be calculated as:
PV = 1000 / (1+0.10)^1 + 1000 / (1+0.10)^2 = $826.44
The present value of $800 received at the end of Year 3 is:
PV = 800 / (1+0.10)^3 = $653.97
The present value of $700 received at the end of Year 4 is:
PV = 700 / (1+0.10)^4 = $549.59
To find the total present value of the investment, we add up these present values:
Total PV = $826.44 + $826.44 + $653.97 + $549.59 = $2856.44