Problem 5-5 Present Value (LG5-3) Compute the present value of a $2,500 deposit in year 3,...
Problem 5-5 Present Value (LG5-3)
Compute the present value of a $2,500 deposit in year 3, and another $2,000 deposit at the end of year 5 if interest rates are 8 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Homework Answers
Let The cash flow in year n be denoted by CFn
Given, CF3 = $2500
CF5 = $2000
Interest Rate = r = 8%
Hence, Present Value = NPV = CF3/(1+r)3 + CF5/(1+r)5
= 2500/(1+0.08)3 + 2000/(1+0.08)5
= $3,345.75
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