Question

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%?

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.