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What is the present value of the following cash flows if I can earn 5% per...

What is the present value of the following cash flows if I can earn 5% per year:

T CF

0 -5 million

1 2 million

2 2 million

3 2 million

4 2 million

5 0

6 0

7 -3 million

8 -3 million

9 0

10 10 million

11 8 million

*Please post any calculations done by calculator or any formulas used*

Expert Solution

The present value is 8.745905780 million

Note - How did we calculate discounting factor @5%

Year 0 - Discounting factor is always 1

Year 1 - 1 / 1.05

= 0.952380952

Year 2 - 0.952380952/ 1.05

= 0.907029478

Year 3 - 0.907029478 / 1.05

= 0.863837599

Year 4 - 0.863837599 / 1.05

= 0.822702475

Year 5 - 0.822702475 / 1.05

= 0.783526166

Year 6 - 0.7835261661 / 1.05

= 0.746215397

Year 7 - 0.746215397 / 1.05

= 0.710681330

Year 8 - 0.710681330 / 1.05

= 0.676839362

Year 9 - 0.676839362 / 1.05

= 0.644608916

Year 10 - 0.644608916 / 1.05

= 0.613913254

Year 11 - 0.613913254 / 1.05

= 0.584679289

The cash flow figures are in $ million

jeff jeffy answered 2 years ago

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