Question

# What is the present value of the following cash flow stream at a discount rate of...

What is the present value of the following cash flow stream at a discount rate of 7%? \$0 in year 0 \$1,000 at the end of year 1 \$2,500 at the end of year 2 \$3,500 at the end of year 3 \$4,250 at the end of year 4 \$2,500 at the end of year 5

#### Homework Answers

Answer #1

We can use the present value table to find out the required present value.

Present value of cash flows = \$1000 * PVIF (7%,1 year) + \$2500 * PVIF (7%, 2 years) + \$3500 * PVIF (7%, 3 years) + \$4250 * PVIF(7%, 4 years) + \$2500 * PVIF(7%, 5 years)

Now, we will use the present value table to find out the values of PVIF (present value interest factor) @7% for different years.

Present value of cash flows = (\$1000 * 0.935) + (\$2500 * 0.873) + (\$3500 * 0.816) + (\$4250 * 0.763) + (\$2500*0.713)

Present value of cash flows = \$935 + \$2182.5 + \$2856 + \$3242.75 + \$1782.5

Present value of cash flows = \$10998.75

Know the answer?
Your Answer:

#### Post as a guest

Your Name:

What's your source?

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Not the answer you're looking for?
Ask your own homework help question