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: Show Calculations

a.      A single cash inflow of $12,000 in five years, discounted at an 11% rate of return.

b.     An annual receipt of $16,000 over the next 12 years, discounted at an 11% 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 12% 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 an 11% rate of return.

Explanation / Answer

a. A single cash inflow of $12,000 in five years, discounted at an 11% rate of return.

PV = 12000/(1.11)^5 = $7121.42

b. An annual receipt of $16,000 over the next 12 years, discounted at an 11% rate of return.

PV = 16000PVIFA(11%,12) = 16000*6.492356 = $103,877.70

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 12% rate of return.

PV = 15000/1.12 + 10000/1.12^3 = $ 20510.66

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 an 11% rate of return.

PV = 8000/1.11 + 8000/1.11^2 + 8000/1.11^3 + 10000/1.11^4 = $26137.03

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

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