Question

Year Amount of cash flow 1-4 $25,000 per year (payments at the end of the year)...

Year Amount of cash flow

1-4 $25,000 per year (payments at the end of the year)

5-9 $20,000 per year (payments at the end of the year)

Assume an interest rate of 6% compounded annually.

Calculate the present value of the stream of cash flows above.

Use .5919 as the PV factor

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Answer #1

Using excel pv function, with nper = year, rate = 0.06,fv = amount, pmt = 0

cf pv
1 25000        23,584.91
2 25000        22,249.91
3 25000        20,990.48
4 25000        19,802.34
5 20000        14,945.16
6 20000        14,099.21
7 20000        13,301.14
8 20000        12,548.25
9 20000        11,837.97
Total    1,53,359.37
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