Question

Assume that you will receive $3000/year in Years 1 through 5, $4000/year in Years 6 through 10 with all cash flows to be received at the end of each year. If you require a 12 percent rate of return, then what is the present value of these cash flows?

Answer 1

A C D E 12% 2 Required rate CASHFLOW 3 YEAR PVF at 12% Present Vaue 4 3000 0.892857143 2678.57 5 2 3000 0.797193878 2391.58 6 3000 0.711780248 2135.34 0.635518078 7 4 3000 1906.55 8 5 3000 0.567426856 1702.28 9 6 4000 0.506631121 2026.52 10 7 4000 0.452349215 1809.40 11 4000 0.403883228 1615.53 12 9 4000 0.360610025 1442.44 13 10 4000 0.321973237 1287.89 18996.12 Present Value of Cashflows 14 The formula sheet is attached below A В C D E 0.12 Required rate 3 PVF at 12% YEAR CASHFLOW Present Vaue - 1 / ( 1 + $D$2 ) ^ B4 C4 D4 - 1 / ( 1 + SD$2 ) AB5 -C5*DS - 1 / ( 1+ $D$2 ) ^B6 C6*D6 - 1 / ( 1 + SD$ 2 )^B7C7*D7 - 1 / ( 1 + $ D$2 ) ^B8C8 D8 - 1 / ( 1 + $D$2)^B9C9 D9 - 1 / ( 1 + SD$ 2 )^B1o -C10 D10 - 1 / ( 1 + SD$ 2 )^B1 1 -C11 D11 - 1 / ( 1+ SDS2 )^B1 2 C12 D12 - 1 / ( 1 + SD$ 2 ) ^B13 C13 D13 3000 3000 6 3000 4 3000 7 3000 6 4000 7 4000 10 8 4000 11 12 4000 10 4000 13 -SUM(E4:E13) Present Value of Cashflows 14