Present Value What is the present value of a 2300 deposit in

Present Value What is the present value of a $2,300 deposit in year 4 and another $2,800 deposit at the end of year 8 if interest rates are 9 percent?

Solution

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=$2300/1.09^4+$2800/1.09^8

which is equal to

=$3034.60(Approx)(Please note that intermediate calculations have not been rounded off].