An investment will pay 1351 two years from now 2973 four yea

An investment will pay $1,351 two years from now, $2,973 four years from now, and $1,1303 five years from now. If the opportunity rate is 11.77 percent per year, what is the present value of this investment?

Round answer to two decimal places

Solution

Given Information :

Cash Inflow after 2 years from now (CI @ 2nd yr.end) = 1351

Cash Inflow after 4 years from now (CI @ 4th yr.end) = 2973

Cash Inflow after 5 years from now (CI @ 5th yr.end) = 11303

Opportunity Rate = 11.77%

therefore, Present Value of Investment (PV) = {CI @ 2nd yr.end * PVF(11.77%,2nd yr.)} + {CI @ 4th yr.end * PVF(11.77%,4th yr.)} + {CI @ 5th yr.end * PVF(11.77%,5th yr.)}

= {1351*0.800} + {2973*0.641} + {11303*0.573}

= 1080.80 + 1905.69 + 6476.62

= 9463.11

Hence, Present Value of this Investment is $9463.11

Thankyou