Conoly Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18 percent and at 24 percent? Year 1, 2, 3, and 4 Cash Flow $1,200, 600, 855 and 1,480 respectively

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ewomazinoade ewomazinoade · Answer 1 · 2021-07-30T03:39:15+02:00

Answer:

Present Value when discount rate is 10% = $3240.01

Present Value when discount rate is 24% = $2432.40

Present Value when discount rate is 18% = $2,731.61

Explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow in year 1 = $1,200

Cash flow in year 2 = 600

Cash flow in year 3 = 855

Cash flow in year 4 = 1,480

Present Value when discount rate is 10% = $3240.01

Present Value when discount rate is 24% = $2432.40

Present Value when discount rate is 18% = $2,731.61

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute