Answer:
Explanation:
Since the four<em>-cash-flow stream</em> is <em>uneven</em>, the manual calculation involves the calculation of four separate present values which you have to add.
The <em>cash flows </em>are:
- Year 1: 700
- Year 2: 355
- Year 3: 240
- Year 4: 320
The required rate of return is r = 10% = 0.10
The formula that you must use is:
Where <em>PV </em>is the <em>present value</em>; CF₁, CF₂, CF₃, CF₄ are the cash flows of the years 1, 2, 3, and 4 respectively, and i is the annual return.
Substituting: