if an investment will pay you $120 in one year and $200 in two years. If...
Homework Answers
Present value of cash flows = Cash flow in Year 1 {1/(1+i)1} + Cash flow in year 2{1/(1+i)2}
=$120{1/(1+0.04)}+$200{1/(1+0.04)2}
=$120 X 0.9615384615 +$200 X 0.924556213
=115.3846154+$184.9112426
=$300.295858
=$300.30 (Approxe.)
Note: I have used formula to calculate discounting factor. Alternatively We can use Present value table to discounting factor directly.
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an investment will pay you $120 in one year and $200 in two years.
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