Question

Calculate the Present Value of the cash flow shown below. Interest rate is: 6.50% per year,...


Calculate the Present Value of the cash flow shown below.
Interest rate is: 6.50% per year, compounded annually
$0 $0 $745 $0 $3,140 $0 $4,000 $0 $0 $2,275 $0
year 0 1 2 3 4 5 6 7 8 9 10
$0 $0 -$4,470 $0 $0 $0 $0 -$3,020 -$3,020 $0 $0

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Answer #1

Interest rate = 6.5% compounded annually

Year Cash Flow Present value Rough work to calculate present value
0 0 0 -
1 0 0 -
2 745 656.83 [745 / 1.065^2]
3 0 0 -
4 3,140 2,440.79 [3,140 / 1.065^4]
5 0 0 -
6 4,000 2,741.33 [4,000 / 1.065^6]
7 0 0 -
8 0 0 -
9 2,275 1,290.72 [2,275 / 1.065^9]
10 0 0 -
7,129.68

b)

Year Cash Flow Present value Rough work to calculate present value
0 0 0 -
1 0 0 -
2 -4,470 3,941.01 [-4,470 / 1.065^2]
3 0 0 -
4 0 0 -
5 0 0 -
6 0 0 -
7 -3,020 -1,943.38 [-3,020 / 1.065^7]
8 -3,020 -1,824.77 [-3,020 / 1.065^8]
9 0 0 -
10 0 0 -
-7,709.17
0 0
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