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Different cash flow.??Given the following cash? inflow, what is the present value of this cash flow...

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Different cash flow.??Given the following cash? inflow, what isthe present value of this cash flow at 8 %?, 12 %?, and 26?%discount? rates?

Year? 1: ?$3,000

Year? 2: ?$5,000

Years 3 through? 7: ?$0

Year? 8: ?$24,000

What is the present value of this cash flow at 8?%, 12%, 26%discount? rate?

Answer & Explanation Solved by verified expert
3.7 Ratings (494 Votes)

Year Cash flow Discount factor @ 8% Present Value Cash flow Discount factor @ 12% Present Value Cash flow Discount factor @ 26% Present Value
1 $         3,000 0.925926 $   2,777.78 $     3,000 0.892857 $   2,678.57 $    3,000 0.793651 $   2,380.95
2 $         5,000 0.857339 $   4,286.69 $     5,000 0.797194 $   3,985.97 $    5,000 0.629882 $   3,149.41
8 $       24,000 0.793832 $ 19,051.97 $ 24,000 0.71178 $ 17,082.73 $ 24,000 0.499906 $ 11,997.74
Total $ 26,116.45 $ 23,747.27 $ 17,528.10
Working:
Discount factor = (1+i)^-n Where,
i Discount rate
n Year
So, discount rate for year:
At 8% At 12% At 26%
1 = 1.08^-1 = 0.925926 1.12^-1 = 0.892857 1.26^-1 = 0.793651
2 = 1.08^-2 = 0.857339 1.12^-2 = 0.797194 1.26^-2 = 0.629882
8 = 1.08^-3 = 0.793832 1.12^-3 = 0.71178 1.26^-3 = 0.499906

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Transcribed Image Text

Different cash flow.??Given the following cash? inflow, what isthe present value of this cash flow at 8 %?, 12 %?, and 26?%discount? rates?Year? 1: ?$3,000Year? 2: ?$5,000Years 3 through? 7: ?$0Year? 8: ?$24,000What is the present value of this cash flow at 8?%, 12%, 26%discount? rate?

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