Question

Huggins Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 830 2 1,150 3 1,410 4 1,550 If the discount rate is 8 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $ What is the present value at 16 percent?

Answer 1

Answer:

$4,013.10.

$3,329.54.

Explanation:

If discount rate is 8%

PV of Cash Flows :

($830 / 1.08^1) + ($1,150 / 1.08^2) + ($1,410 / 1.08^3) + ($1,550 / 1.08^4)

$768.52 + $985.94 + $1,119.30 + $1,139.30

$4,013.10

If discount rate is 16%

PV of Cash Flows :

($830 / 1.16^1) + ($1,150 / 1.16^2) + ($1,410 / 1.16^3) + ($1,550 / 1.16^4)

$715.52 + $854.64 + $903.33 + $856.05

$3,329.54.