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1 answer:
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Find attached the missing cash flow stream
Answer:
- <u><em>Present value = $1,685,334 (rounded to the nearest whole)</em></u>
Explanation:
Since the <em>cash flow stream</em> is <em>uneven</em>, you must discount each stream individually and after you have discounted every stream you can add each preset value to find the net present value.
The formula for <em>present value</em> is:
<u>1. Year 1:</u>
- Future value = $250,000
- r = 4%
- n = 1
<u>2. Year 2:</u>
- Future value = $20,000
- r = 4%
- n = 2
<u>3. Year 3:</u>
- Future value = $330,000
- r = 4%
- n = 3
<u>4. Year 4:</u>
- Future value = $450,000
- r = 4%
- n = 4
<u>5. Year 5:</u>
- Future value = $550,000
- r = 4%
- n = 5
<u>6. Year 6:</u>
- Future value = $375,000
- r = 4%
- n = 6
Total present value = $240,384.62 + $18,491.12 + $293,368.80 + $384,661.89 + $452,059.91 + $296,367.95 + $ 296,367.95
Total present value = $1,685,334.29 = $ 1,685,334
