Question

Consider the following timeline detailing a stream of cash​ flows: The timeline starts at Date 0 and ends at Date 4. The cash flow on Date 0 is indicated by a question mark. On Date 1, the cash flow is 100 dollars. On Date 2, the cash flow is 100 dollars. On Date 3, the cash flow is 200 dollars. On Date 4, the cash flow is 200 dollars. If the current market rate of interest is 6​%, then the present value​ (PV) of this stream of cash flows is closest​ to:

Answer 1

Answer:

$509.68

Explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

cash flow in year 1 = $100

cash flow in year 2 = $100

cash flow in year  3= $200

cash flow in year 4 = $200

I = 6%

PV = $509.68

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute