In the following cash flows diagram, Determine the value of F that makes the two cash flows diagrams equivalent if the interest rate i = 12% per year? 100 100 100 100 100 100 F 012 3 4 5 6 3. End of Year End of Year a. $428 b. $596 c. $704 d. $686

In the following cash flows diagram, Determine the value of F that makes the two cash flows diagrams equivalent if the interest rate i = 12% per year? 100 100 100 100 100 100 F 012 3 4 5 6 3. End of Year End of Year a. $428 b. $596 c. $704 d. $686

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.12: Uneven, Or Irregular, Cash Flows

Problem 3ST

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Concept explainers

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.

Question

In the following cash flows diagram,
Determine the value of F that makes the two
cash flows diagrams equivalent if the
interest rate i = 12% per year?
100 100 100 100
100 100
F
1
2
3
4
6
3
5
End of Year
End of Year
a.
$428
b. $596
С.
$704
d. $686
O O

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