Draw a cash flow diagram given the following data and determine the values of P and F. Length of period: 8 years Payment (respectively from 1st-8th year): P3000, P2250, P1687.50, P1265.63, P949.22, P711.91, P533.94, P400.45 rate of interest: -25% (negative in value) i: 12%

Draw a cash flow diagram given the following data and determine the values of P and F. Length of period: 8 years Payment (respectively from 1st-8th year): P3000, P2250, P1687.50, P1265.63, P949.22, P711.91, P533.94, P400.45 rate of interest: -25% (negative in value) i: 12%

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 1MC

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

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