Question

Suppose you expect the following future cash flows: $9200 at the end of year 1, $10400 at the end of year 2, nothing at the end of year 3 and $16350 at the end of year 4. What is the present value of this series of payments at 9% interest?

Answer 1

Answer:

$28,776.59

Explanation:

Present value is the sum of after tax cash flows derived from an investment.

Present value can be calculated using a financial calculator

Cash flow in year 1 = $9200

Cash flow in year 2 = $10400

Cash flow in year 3 = 0

Cash flow in year 4 = $16350

Discount rate = 9%

Present value = $28,776.59

To calculate present value using a financial calculator:

1. press the CF button, enter 0 at CF0

2. press enter and the arrow facing downward

3.input all the values then press NPV

4. Input discount rate, press enter and the downward arrow button

5. You would see NPV, press CPT to derive the present value

I hope my answer helps you