Question

You expect an investment to return $11,300, $14,600, $21,900, and $38,400 annually over the next four years, respectively. What is this investment worth to you today if you desire a rate of return of 16.5 percent

Answer 1

Answer:

$55,153.57

Explanation:

To determine the worth of the investment today, calculate the present value of the cash flows.

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator.

Cash flow in year one = $11,300

Cash flow in year two = $14,600

Cash flow in year three = $21,900

Cash flow in year four = $38,400

I = 16.5%

Present value = $55,153.57

To find the PV using a financial calacutor:

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

I hope my answer helps you