Question

You will be receiving cash flows of: $2,000 today, $2,000 at the end of year 1,...

You will be receiving cash flows of: $2,000 today, $2,000 at the end of year 1, $3,000 at the end of year 3, and $6,000 at the end of year 5. What is the net present value of these cash flows at an interest rate of 4%?

Homework Answers

Answer #1

Rate of interest = 4% or 0.04

Table showing net present value of cash inflows at different years where rate of interest is 4% or 0.04 -

Year Cash Inflow Interest rate Future value interest factor Net Present Value
0 $2,000 4% 1.0000 $2,000.00
1 $2,000 4% 1.0400 $1,923.08
3 $3,000 4% 1.1249 $2,666.90
5 $6,000 4% 1.2167 $4,931.37
$11,521.35

Total net present value of cash infows is $11,521.35.

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