If the discount rate is 7 percent, what is the present value of these cash flows

ID: 2651481 • Letter: I

Question

If the discount rate is 7 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What is the present value at 17 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What is the present value at 25 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Wainright Co. has identified an investment project with the following cash flows.

Explanation / Answer

To find the PV of a lump sum, we use:

PV =FV / (1 +r )^t

PV@7%

=800/1.07+1090/1.07^2+1350/1.07^3+1475/1.07^4

3926.98

PV@17%

=800/1.17+1090/1.17^2+1350/1.17^3+1475/1.17^4

3110.05

PV@25%

=800/1.25+1090/1.25^2+1350/1.25^3+1475/1.25^4

2632.96