Question

What is the present worth in period 0 using an interest rate of 4 percent of end of period cash flows starting at the end of period 1 of -1000, -700, -400, -100, 200, 500, 800, and 1100

Answer 1

Answer:
a) Calculation of present value of cash flows:
	Year	Cash inflows		Present value factor at 4%	Present value
	1	($1,000)	1/1.04 =	0.96154	($961.54)
	2	($700)	D12/1.04 =	0.92456	($924.56)
	3	($400)	D13/1.04 =	0.88900	($622.30)
	4	($100)	D14/1.04 =	0.85480	($341.92)
	5	$200	D15/1.04 =	0.82193	($82.19)
	6	$500	D16/1.04 =	0.79031	$158.06
	7	$800	D17/1.04 =	0.75992	$379.96
	8	$1,100	D18/1.04 =	0.73069	$584.55
				Total	($1,809.93)
Therefore, the present value of cash flows is -$ 1809.93 (Answer)