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

Hi,

Please find the answer as follows:

Part A:

Present Value = 12000/(1+.12)^5 = 6809.12

Part B:

Present Value = 16000/(1+.14)^1 + 16000/(1+.14)^2 + 16000/(1+.14)^3 + 16000/(1+.14)^4 + 16000/(1+.14)^5 + 16000/(1+.14)^6 + 16000/(1+.14)^7 + 16000/(1+.14)^8 + 16000/(1+.14)^9 + 16000/(1+.14)^10 + 16000/(1+.14)^11 + 16000/(1+.14)^12 = 90564.67

Part C:

Present Value = 15000/(1+.10)^1 + 10000/(1+.10)^3 = 21149.51

Part D:

Present Value = 8000/(1+.16)^1 + 8000/(1+.16)^2 + 8000/(1+.16)^3 + 10000/(1+.16)^4 = 23490.03

Thanks

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.