Question

McCann Co. has identified an investment project with the following cash flows.

Year Cash Flow
1 $840
2 1,170
3 1,430
4 1,575
a. If the discount rate is 9 percent, what is the present value of these cash flows?
b. What is the present value at 16 percent?
c. What is the present value at 25 percent?

Answer 1

McCann Co.

Present value

a. At 9$ = $2,017.38

b. At 16% = $3,379.42

c. At 25% = $2,798.71

Step-by-step explanation:

a) Data and Calculations:

Year Cash Flow Discount Present

Factor at 9% Value

1 $840 0.917 $770.28

2 1,170 0.842 143.14

3 1,430 0.772 1,103.96

4 1,575 0.708 1,115.10

Total Present value = $2,017.38

Year Cash Flow Discount Present

Factor at 16% Value

1 $840 0.862 $724.08

2 1,170 0.743 869.31

3 1,430 0.641 916.63

4 1,575 0.552 869.40

Total Present value = $3,379.42

Year Cash Flow Discount Present

Factor at 25% Value

1 $840 0.800 $672.00

2 1,170 0.640 748.80

3 1,430 0.512 732.16

4 1,575 0.410 645.75

Total Present value = $2,798.71