Calculate the present value of the following cash flows, rounding to the nearest

Question

Calculate the present value of the following cash flows, rounding to the nearest dollar:

a. A single cash inflow of $12,000 in five years, discounted at a 12% rate of return.

b. An annual receipt of $16,000 over the next 12 years, discounted at a 14% rate of return.

c. A single receipt of $15,000 at the end of year 1 followed by a single receipt of $10,000 at the end of year 3. the company has a 10% rate of return.

d. An annual receipt of $8,000 for three years followed by a single receipt of $10,000 at the end of year 4. The company has a 16% rate of return.

Explanation / Answer

a. pv = 12000/1.12^5 = $6809.12

b. pv = 16000*pvifa(14,12) = 16000*5.66 = 90560

.c.pv = (15000/1.1)+(10000/1.1^3) = $21149.51

d. pv = (8000/1.16)+(8000/1.16^2)+(8000/1.16^3)+(10000/1.16^4) = $23490.02

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