Question

Assume the appropriate discount rate for the following cash flows is 9.9 percent.

Year Cash Flow
1 $1,950
2 1,850
3 1,550
4 1,350

Required:
What is the present value of the cash flows?

Answer 1

Total PV= $5,399.2

Step-by-step explanation:

Giving the following information:

Year Cash Flow

1 $1,950

2 1,850

3 1,550

4 1,350

Discount rate= 9.9%

To calculate the present value, we need to use the following formula on each cash flow:

PV= Cf/(1+i)^n

PV1= 1,950/1.099= 1,774.34

PV2= 1,850/1.099^2= 1,531.71

PV3= 1,550/1.099^3= 1,167.72

PV4= 1,350/1.099^4= 925.43

Total PV= $5,399.2