Question

Different cash flow. Given the cash inflow in the following table, what is the present value of this cash flow at

6%, 13%, and 22% discount rates?
What is the present value of this cash flow at 6% discount rate?
(Round to the nearest cent.)
exa
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Year 1:
$2,000
Year 2:
$8,000
$0
Years 3 through 7:
Year 8:
$24,000

Answer 1

To calculate the present value of the cash flow at different discount rates, we can use the present value formula:

PV = CF1/(1+r)^1 + CF2/(1+r)^2 + ... + CFn/(1+r)^n

where PV = present value, CF = cash flow, r = discount rate, and n = number of years.

At 6% discount rate:

PV = $2,000/(1+0.06)^1 + $8,000/(1+0.06)^2 + $24,000/(1+0.06)^8

PV = $1,886.79 + $7,056.64 + $12,518.33

PV = $21,461.76

At 13% discount rate:

PV = $2,000/(1+0.13)^1 + $8,000/(1+0.13)^2 + $24,000/(1+0.13)^8

PV = $1,769.91 + $6,156.63 + $8,565.98

PV = $16,492.52

At 22% discount rate:

PV = $2,000/(1+0.22)^1 + $8,000/(1+0.22)^2 + $24,000/(1+0.22)^8

PV = $1,652.89 + $5,184.50 + $4,303.07

PV = $11,140.46

Therefore, the present value of the cash flow at 6%, 13%, and 22% discount rates are $21,461.76, $16,492.52, and $11,140.46, respectively.