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4. Your investment in a bicycle shuttle service is expected last for 5 years. The expected...

4. Your investment in a bicycle shuttle service is expected last for 5 years. The expected series of CFs is C1= $30K, C2=$20K, C3=$40K, C4=$20, and C5=$60K. Using a discount rate of 8%, calculate the PV of this stream of expected CFs from the service, rounding your answer to the nearest dollar. .

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Answer #1

The investment in bicycle shuttle service is expected to last 5 years and generate cash inflows every year.

To calculate the present value of all the expected cashflows, we need to discount all future cashflows with a discount rate.

Discount rate = 8%

Year Cash flow (In thousand $) Discounting factor @ 8% Present value @ 8%
1 $ 30k 0.925 27.78
2 $ 20k 0.857 17.15
3 $ 40k 0.793 31.75
4 $ 20k 0.735 14.70
5 $ 60k 0.680 40.83
Total $ 132.21k

Present value of all the expected cashflows sum upto $132 k (rounded off to nearest dollar.)

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