Different cash flow.??Given the following cash? inflow, what is the present value of this cash flow...

Free

70.2K

Verified Solution

Question

Finance

Different cash flow.??Given the following cash? inflow, what isthe present value of this cash flow at 8 %?, 12 %?, and 26?%discount? rates?
Year? 1: ?$3,000
Year? 2: ?$5,000
Years 3 through? 7: ?$0
Year? 8: ?$24,000
What is the present value of this cash flow at 8?%, 12%, 26%discount? rate?

Answer & Explanation Solved by verified expert

3.7 Ratings (494 Votes)


Year	Cash flow	Discount factor @ 8%	Present Value		Cash flow	Discount factor @ 12%	Present Value		Cash flow	Discount factor @ 26%	Present Value
1	$ 3,000	0.925926	$ 2,777.78		$ 3,000	0.892857	$ 2,678.57		$ 3,000	0.793651	$ 2,380.95
2	$ 5,000	0.857339	$ 4,286.69		$ 5,000	0.797194	$ 3,985.97		$ 5,000	0.629882	$ 3,149.41
8	$ 24,000	0.793832	$ 19,051.97		$ 24,000	0.71178	$ 17,082.73		$ 24,000	0.499906	$ 11,997.74

Total			$ 26,116.45				$ 23,747.27				$ 17,528.10


Working:

Discount factor		=	(1+i)^-n		Where,
					i	Discount rate
					n	Year

So, discount rate for year:
			At 8%				At 12%			At 26%
1	=	1.08^-1	=	0.925926		1.12^-1	=	0.892857		1.26^-1	=	0.793651
2	=	1.08^-2	=	0.857339		1.12^-2	=	0.797194		1.26^-2	=	0.629882
8	=	1.08^-3	=	0.793832		1.12^-3	=	0.71178		1.26^-3	=	0.499906

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Different cash flow.??Given the following cash? inflow, what isthe present value of this cash flow at 8 %?, 12 %?, and 26?%discount? rates?Year? 1: ?$3,000Year? 2: ?$5,000Years 3 through? 7: ?$0Year? 8: ?$24,000What is the present value of this cash flow at 8?%, 12%, 26%discount? rate?