Question 2 5 pts What is the present worth of the cash flows

Question 2 5 pts What is the present worth of the cash flows in table below? Use an interest rate of 8% compounded annually. 2 3 4 Year lo 4,000 6.0005.000 4,000 3.000 2.000 flow

Solution

INTEREST RATE(DISCOUNT FACTOR)

(See Note 2)

Interest Rate 8%

Present Cash Flow(column 2*Column 3)

(see Note 1)

Note 1: Present Cash flow amount Round off to Multiple of Nearest 1

Note 2: interest Rate Factor or Discount factor is computed on the basis of statistical table

Other wise used The equation is

1/(1 Year +interest Rate)^(Number of year)

Year 0 : taken as 1.0000

  

YEAR	CASHFLOW	INTEREST RATE(DISCOUNT FACTOR) (See Note 2) Interest Rate 8%	Present Cash Flow(column 2*Column 3) (see Note 1)
0	4000	1.0000	4000
1	6000	0.9259	5555
2	5000	0.8573	4286
3	4000	0.7939	3156
4	3000	0.735	2205
5	2000	0.6806	1361
TOTAL	24000		20563