Question

McCann Co. has identified an investment project with the following cash flows.
Year Cash Flow
1 $820
2 1,130
3 1,390
4 1,525
Required:
a. If the discount rate is 10 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. What is the present value at 16 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)c.What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

Present value when discount rate is 10% = $3765.26

Present value when discount rate is 16% = $3,279.43

Present value when discount rate is 25% = $2,715.52

Explanation:

Present value can be calculated by discounting the cash flows at the discount rate.

Present value can be calculated using a financial calculator:

 

Cash flow for year 1 = $820 

Cash flow for year 2 = $ 1,130 

Cash flow for year 3 = $1,390 

Cash flow for year 4 = $1,525

Present value when discount rate is 10% = $3765.26

Present value when discount rate is 16% = $3,279.43

Present value when discount rate is 25% = $2,715.52

I hope my answer helps you