Question

What is the present value of a cash flow of $900 if the rate of annual interest is 4.5 % ? Round to the nearest cent.

The present value is $

Answer 1

Present value of a cash flow = $861.24 (Approx)

Explanation:

Given:

Cash flow (CF) = $900

Annual rate of interest (r) = 4.5% = 4.5 / 100 = 0.045

Number of year (n) = 1 year

Find:

Present value of a cash flow = ?

Computation:

`Present\ value\ of\ cash\ flow =(cash\ flow)/((1+r)^n)\\\\Present\ value\ of\ cash\ flow =(900)/((1+0.045)^1)\\\\Present\ value\ of\ cash\ flow =(900)/((1.045))\\\\Present\ value\ of\ cash\ flow =861.244`

Present value of a cash flow = $861.24 (Approx)