Question

what is the present value of the following cash flow stream at a rate of 10.0%? 1 -1,500 2 $3,000 3 $4,500 4 $5,000

Answer 1

Asuming the cash flow at the end of the year which is similar to Annuity, with different amount for each cash flow

0-----------1-----------2------------3-------------4 (Timeline)

-1500 3000 4000 5000

interest rate for discounting is r = 10%

If we put values in the formula for all cash flow

CF1 = -1500, CF2 = 3000, CF3 = 4000, CF4 = 5000

PV = $7536

Asuming the cash flow at the begning of each year which is similar to Annuity due, with different amount for each cash flow

0-----------1------------2-------------3 (Timeline)

-1500 3000 4000 5000

interest rate for discounting is r = 10%

If we put values in the formula for all cash flow

CF1 = -1500, CF2 = 3000, CF3 = 4000, CF4 = 5000

PV = $8289.63