Question

If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then present value of these cash flow is:_____

Answer 1

Answer:

Present value is $2561.98

Explanation:

Below are the given values in the questions.

Interest rate = 10 %

First-year cash flow = $1000

Second year cash flow = $2000

Now we have to find the present value of these cash flow by using the above values.

The calculation of present value is as follows:

Present Value = cash inflow/(1 + i)^N  

Present Value = 1000/(1 + 0.10)^1 + 2000/(1 + 0.10)^2

Present Value = $2,561.98