Answer:
$2,721.34
Explanation:
The computation is shown below:
The present value of the following cash flow stream is $8,400
The Present value after applying the discount factor of each year is presented below:
Year Annual cash flows Discount factor Present value
Year 1 $2,000 0.9174311927 $1,834.862
Year 2
Year 3 $2,600 0.7721834801 $2,007.677
Year 4 $3,200 0.7084252111 $2,266.961
Total $6,109.500
The remaining amount is
= $8,400 - $6,109.500
= $2,290.50
And, in year 2, the factor is
= (1 + rate)^2
= (1 + 0.09)^2
= 1.1881
So, the missing cash flow is
= $2,290.50 × 1.1881
= $2,721.34
The discount factor should be computed by
= 1 ÷ (1 + rate) ^ years
