Given a 4% required return, what is a $100 cash flow today, a
$1,000 cash flow...
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Given a 4% required return, what is a $100 cash flow today, a$1,000 cash flow at the end of 1 year, and a $100,000 cash flow atthe end of five years, worth to you TODAY? Referring to thequestion above, what would those same cash flows be worth to you atthe end of five years?
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4.5 Ratings (881 Votes)
Cash flow
Discount rate
0.04
Year
0
1
2
3
4
5
Cash flow stream
100
1000
0
0
0
100000
Discounting factor
1
1.04
1.0816
1.124864
1.1698586
1.216653
Discounted cash flows project
100
961.5385
0
0
0
82192.71
NPV = Sum
of discounted cash flows
NPV Cash flow =
83254.25
Where
Discounting factor =
(1 +
discount rate)^(Corresponding period in years)
Discounted Cashflow=
Cash flow
stream/discounting factor
FV
Future Value
Last period=
5
Compounding rate
4.000%
Year
0
1
2
3
4
5
Cash flow stream
100
1000
0
0
0
100000
Compounding factor
1.217
1.170
1.125
1.082
1.040
1.000
Compounded cash flows Â
121.665
1169.859
0.000
0.000
0.000
100000.000
FV = Sum of compounded cash flows
FV=
101291.52
Where
Compunding factor =
(1 +
rate)^(Last period-Corresponding period in years)
Compounded Cashflow=
Cash flow
stream*compounding factor
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