Question

identified an investment project with the following cash flows. Year Cash Flow 1 $850 2 1,190 3 1,450 4 1,600 a.If the discount rate is 7 percent, what is the present value of these cash flows

Answer 1

Answer:

Total present value= $4,238.04

Explanation:

Giving the following information:

Cf1= $850

Cf2= 1,190

Cf3= 1,450

Cf4= 1,600

discount rate= 7 percent

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

PV= Cf/(1+i)^n

Cf1= 850/1.07= 794.39

Cf2= 1,190/1.07^2= 1,039.39

Cf3= 1,450/1.07^3= 1,183.63

Cf4= 1,600/1.07^4= 1,220.63

Total present value= $4,238.04