Answer:
The present value of the cashflows will be $12830.30
Explanation:
The present value of the cashflows can be calculated by dividing the cash flows by the appropriate discount rate and for the appropriate time period.
The present value of the given cash flows will be,
Present Value = CF1 / (1+r) + CF2 / (1+r)^2 + .... + CFn / (1+r)^n
As the first payment is received today, it will already be in the present value so it will not be discounted.
Present value = 2000 + 3000 / (1+0.1) + 5000 / (1+0.1)^3 + 7000 / (1+0.1)^5
Present value = $12830.295 rounded off to $12830.30
Answer:
$12 830.29
Explanation:
The future cash flows are discounted at the interest rate to get present value
Year 0 =$2000
Year 1 = $3000
Year 3 = $5000
Year 5 = $7000
r = 10%
PV of cash flows = 2000+3000/(1.1)^1+5000/(1.1)^3+7000/(1.1)^5
=2000+2727.27+3756.57+4346.45
=$12830.29
