Final answer:
To calculate the present value of the cash flows, discount them based on the given discount rate. The value at 10% discount rate is $3,199.74, at 18% is $2,333.53, and at 24% is $1,883.32.
Step-by-step explanation:
To calculate the present value of the cash flows, we need to discount them based on the given discount rate. Here are the calculations:
Discount rate: 10%
Year 1: $720 / (1 + 0.10) = $654.55
Year 2: $930 / (1 + 0.10)² = $751.31
Year 3: $1,190 / (1 + 0.10)³ = $901.02
Year 4: $1,275 / (1 + 0.10)⁴ = $892.86
Total value at 10% discount rate: $654.55 + $751.31 + $901.02 + $892.86 = $3,199.74
Discount rate: 18%
Year 1: $720 / (1 + 0.18) = $610.17
Year 2: $930 / (1 + 0.18)² = $600.92
Year 3: $1,190 / (1 + 0.18)³ = $572.33
Year 4: $1,275 / (1 + 0.18)⁴ = $550.11
Total value at 18% discount rate: $610.17 + $600.92 + $572.33 + $550.11 = $2,333.53
Discount rate: 24%
Year 1: $720 / (1 + 0.24) = $580.65
Year 2: $930 / (1 + 0.24)² = $500.54
Year 3: $1,190 / (1 + 0.24)³ = $431.62
Year 4: $1,275 / (1 + 0.24)⁴ = $370.51
Total value at 24% discount rate: $580.65 + $500.54 + $431.62 + $370.51 = $1,883.32