Question

What is the present value of the following cash-flow stream if the interest rate is 5%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Year Cash Flow
1 $250
2 450
3 350

Answer 1

Answer:

Total PV= $948.6

Explanation:

Giving the following information:

Year Cash Flow

1 $250

2 450

3 350

Interest rate= 5%

To calculate the present value, we need to use the following formula on each cash flow:

PV = Cf/(1+i)^n

PV1= 250/1.05= 238.1

PV2= 450/1.05^2= 408.16

PV3= 350/1.05^3=  302.34

Total PV= $948.6