Question

Biogenesis Inc., expects the following cash flow stream over the next five years. The company discounts all cash flows at a 23 percent discount rate. What is the present value of this cash flow stream

Answer 1

The present value of the cash flows is $ -384,711.72

Find below the missing cash flows:

Year 1 2 3 4 5

Cash flow$(1,133,676) $(978,452) $275,455 $878,326 $1,835,444

Step-by-step explanation:

The computation of the present is done by the cash the cash flows by the discount factor,which is given:1/(1+r)^N

r is the discount rate of 23%

N is the relevant year of cash flow

Year Cash flow discount factor:1/(1+23%)^1

1 -$1,133,676 0.81301 (921,687.80)

2 -$978,452 0.66098 (646,739.37)

3 $275,455 0.53738 148,025.09

4 $878,326 0.43690 383,738.43

5 $1,835,444 0.35520 651,951.94

total net present value (384,711.72)