Question

You receive $10,000 now for an investment that will give you cash flows of $1000 in one year, $2000 in two years, $3000 in three years, and $4000 in four years. If the discount rate is 5% then what is the PV of this investment

Answer 1

Answer:

$8648.76

Explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow in year 1 = 1000

Cash flow in year 2 = 2000

Cash flow in year 3 = 3000

Cash flow in year 4 = 4000

I = 5%

PV = $8648.76

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