16. You have just purchased an investment that generates the following cash flow

Question

16.

You have just purchased an investment that generates the following cash flows for the next four years. You are able to reinvest these cash flows at 4.23 percent, compounded annually. How much is this investment worth today?

End of year

1.   $1,955

2.   $911

3.   $4,071

4.   $1,275

What is the present value of this investment if 4.23 percent per year is the appropriate discount rate?

Round the answer to two decimal places.

Show work

17.

You have been offered the opportunity to invest in a project that will pay $3,537 per year at the end of years one through three and $14,140 per year at the end of years four and five. If the appropriate discount rate is 7.41 percent per year, what is the present value of this cash flow pattern?

Round the answer to two decimal places.

Show work

Explanation / Answer

1.

2.

Year 1 Year 2 Year 3 Year 4 Cash Flows (a)      1,955.00       911.00    4,071.00      1,275.00 Reinvestment @ 4.23% (b= (a) x 4.23%)          82.70          38.54          172.20 Net Cash Flows ((c= (b) + (a))      1,955.00       993.70    4,109.54      1,447.20 Discount Factor @ 4.23%          0.9594       0.9205       0.8831          0.8473 Present Values ((e) = (c ) + (d))      1,875.66       914.68    3,629.23      1,226.19 Net Present Values      7,645.76

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.