Question

The present value of the following cash flow stream is $7151.29 when discounted at 11 percent...

The present value of the following cash flow stream is $7151.29 when discounted at 11 percent annually. What is the value of the missing cash flow?

year cashflow

1 $2000

2 ?

3 $1750

4 $1250

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Homework Answers

Answer #1

Let X be the Missing Value.

PV of CFs = Sum [ CF * PVF (r5, n) ]

Year CF PVF @11% Disc CF
1 $ 2,000.00 0.900901 $ 1,801.80
2 X 0.811622 0.8116X
3 $ 1,750.00 0.731191 $ 1,279.58
4 $ 1,250.00 0.658731 $    823.41
PV of CFs $3904.80 + 0.8116X

Thus 7151.29 = 3904.80 + 0.8116X

0.8116X = 7151.29 - 3904.80

= 3246.49

X = 3246.49 / 0.8116

= $ 4000

Missing CF is $ 4000

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