Question

Problem 5-1 Present Value and Multiple Cash Flows (LO 1] Fox Co. has identified an investment project with the following cash flows. 3.33 points Year 1 WN Cash Flow $ 1,190 1,090 1,540 1,900 eBook References a. If the discount rate is 10 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 18 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 24 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value at 10 percent b. Present value at 18 percent c. Present value at 24 percent

Answer 1

a.Present value=Cash flows*Present value of discounting factor(rate%,time period)

=1190/1.1+1090/1.1^2+1540/1.1^3+1900/1.1^4

=$4437.39(Approx).

b.Present value=Cash flows*Present value of discounting factor(rate%,time period)

=1190/1.18+1090/1.18^2+1540/1.18^3+1900/1.18^4

=$3708.59(Approx).

c.Present value=Cash flows*Present value of discounting factor(rate%,time period)

=1190/1.24+1090/1.24^2+1540/1.24^3+1900/1.24^4

=$3279.93(Approx).