Question

he appropriate discount rate for the following cash flows is 8 percent compounded quarterly. Year Cash Flow 1 $700 2 700 3 0 4 1,100 What is the present value of the cash flows

Answer 1

Thus, the present value is $2045.52.

Step-by-step explanation:

Use the below formula to find the present value:

Present value = FV ÷ (1 + r/4)^(n*4)

Present value :

`=(700)/((1 + (0.08)/(4) )^(1 * 4) ) + (700)/((1 + (0.08)/(4) )^(2 * 4) ) + (0)/((1 + (0.08)/(4) )^(3 * 4) ) +(1100)/((1 + (0.08)/(4) )^(4 * 4) ) \\ \\= (700)/(1.0824)+(700)/(1.1716) +0+(1100)/(1.3727) \\= 2045.52`

Thus, the present value is $2045.52.