Answered: s. What is the present value of these…

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s. What is the present value of these cash flows if the discount rate is 189%?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 15EB: Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is...

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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

Specter Co. has identified an investment project with the following cash flows. What is the present value of these cash flows if the discount rate is 18%?
Year
Cash Flow
$795
S945
$1,325
| S1,860
1
2
3
4
$2450.28
$3118.22
$2250.18
$3314.59

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