Answer
a. PV=$0.31
b. PV=$879.63
Step-by-step explanation:
PV = F / [ (1 + r)^n ]
where
PV = Present Value,
F = Future payment (cash flow),
r = Discount rate=0.80
n = the number of periods in the future=2
a. F=$1
PV = 1/[(1 + 0.8)^ 2]
=1/ [1.8]^2
=1/3.24 =$0.31
b. F=$2,850
PV = 2850/[(1 + 0.80)^ 2]
=2850/ [1.8]^2
=2850/ 3.24
=$879.63
