Question

Assume a project will produce cash flows of $22,400, $28,700, $30,300, $10,900 at the end of Years 1 to 4, respectively. If the discount rate is 14.7 percent, what is the current value of these cash flows?

Answer 1

Answer:

$67,721.52

Explanation:

Given: Cash flow of $22,400, $28,700, $30,300, $10,900 at the end of Years 1 to 4, respectively.

          Discount rate is 14.7%

Now, finding the current value of these cash flows.

NPV= $\frac{cash\ flow}{(1+r)^{n}}$

⇒ $NPV= \frac{\ 22400}{(1+0.147)^{1} }+\frac{\ 28700}{(1+0.147)^{2}}+\frac{\ 30300}{(1+0.147)^{3}}+ \frac{\ 10900}{(1+0.147)^{4}}$

⇒ $NPV= \frac{\ 22400}{(1.147)^{1} }+\frac{\ 28700}{(1.147)^{2}}+\frac{\ 30300}{(1.147)^{3}}+ \frac{\ 10900}{(1.147)^{4}}$

⇒ $NPV= \frac{\ 22400}{(1.147) }+\frac{\ 28700}{(1.3156)}+\frac{\ 30300}{(1.5090)}+ \frac{\ 10900}{(1.7308)}$

⇒ $NPV= \ 19529.20+\ 21815.14+\ 20079.52+ \ 6297.66$

∴ $NPV= \ 67721.52$

Hence, $67721.52 is the current value of these cash flows.