Wilkinson Co. has identified an investment project with the following cash flows
ID: 2736728 • Letter: W
Question
Wilkinson Co. has identified an investment project with the following cash flows: Year Cash Flow 1 $ 820 2 1,130 3 1,390 4 1,525 If the discount rate is 10 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $ If the discount rate is 16 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $ If the discount rate is 25 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $
Explanation / Answer
1.Calculation of Present value of cash flows with discount rate 10%:
year Cash flow PV Factor@10% Present value
1 $820 0.9090 $745.45
2 $1130 0.8264 $933.88
3 $1390 0.7513 $1044.33
4 $1525 0.6830 $1041.60
Total present value of cash flows = $3765.26
2.Calculation of Present value of cash flows with discount rate 16%:
year Cash flow PV Factor@16% Present value
1 $820 0.8620 $706.84
2 $1130 0.7431 $839.70
3 $1390 0.6406 $890.43
4 $1525 0.5523 $842.26
Total present value of cash flows = $3279.23
3.Calculation of Present value of cash flows with discount rate 25%:
year Cash flow PV Factor@25% Present value
1 $820 0.800 $656
2 $1130 0.64 $723.2
3 $1390 0.512 $711.68
4 $1525 0.4096 $624.64
Total present value of cash flows = $2715.52
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