Calculate the value of the following cash flows in todays wo

Calculate the value of the following cash flows in today\'s worth if the interest rate is 9%. Year End of year payment 1S5,375 2 $8,360 3 $864 4 S995

Solution

Present worth ($) = 5,375 x P/F(9%, 1) + 8,360 x P/F(9%, 2) + 864 x P/F(9%, 3) + 995 x P/F(9%, 4)

= 5,375 x 0.9174** + 8,360 x 0.8417** + 864 x 0.7722** + 995 x 0.7084**

= 4,931.03 + 7,036.61 + 667.18 + 704.88

= 13,339.70

**From P/F Factor table