Chapter 4 Problem 11: Present Value and Multiple Cash Flows Conoly Co. has ident

Question

Chapter 4 Problem 11: Present Value and Multiple Cash Flows Conoly Co. has identified and investment project with the following cash flows. If the discount rate is 5 percent, what is the present value of these cash flows? What is the present value at 13 percent? At 18 percent? Year 1 cash flow 1 850 2 740 3 1,090 4 1,310 CHAPTER 4: PROBLEM 11 Discount Rate 5% 13% 18% Year 1: $850 $850 $850 Year 2: $740 $740 $740 Year 3: $1,090 $1,090 $1,090 Year 4: $1,310 $1,310 $1,310 Present Value @ 5%, 13%, and 18% = (Note: Use the built-in NPV formula in Excel.)

Explanation / Answer

1)

cash flows 850,740,1090,1310

PV@5% =NPV(0.05,850:1310) = $3,500.05

2)

PV@18% = NPV(0.18,850:1310) = $2,590.90

3)

PV@13% = NPV(0.13,850:1310)

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