Question

Consider the following cash flows and calculate the Present Value of this cash flow stream if the interest rate is 5%.  Please include two decimals in your answer and a negative if appropriate

Year 0: $113

Year 1: $-379

Year 2: $0

Year 3: $0

Year 4: $492

Answer 1

The question is calculated by computing the net present value.

Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= $113.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter the interest rate of 5%
• Press the down arrow and CPT buttons to get the net present value.  

Net Present value of cash flows at 5% interest rate is $156.82.

In case of any query, kindly comment on the solution.