Final answer:
The present value of a $100 cash flow is calculated using the formula PV = CF / (1 + r)^n, where CF is the cash flow, r is the discount rate, and n is the time period in years. Adjust r and n for different scenarios and sum the present values to get the final answer.
Step-by-step explanation:
To compute the present value of a $100 cash flow, we use the present value formula:
PV = CF / (1 + r)^n
Where:
- PV stands for present value,
- CF represents the future cash flow,
- r is the discount rate, and
- n is the number of time periods.
For various combinations of discount rates and times, you would adjust the 'r' and 'n' in the formula accordingly. After calculating the present value for each time period, you would add up all these values to get the final answer.
For a 15% interest rate, the formula would look like this:
PV = $100 / (1 + 0.15)^n
Substitute 'n' with the respective time period to compute each present value.