Question

Eulis Co. has identified an investment project with the following cash flows.

Year	Cash Flow
1		$	1,290
2			1,240
3			1,590
4			1,950

If the discount rate is 9 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Present value            $

What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Present value            $

What is the present value at 23 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Present value            $

Answer 1

1

Discount rate	9.000%
Year	0	1	2	3	4
Cash flow stream	0.000	1290.000	1240.000	1590.000	1950.000
Discounting factor	1.000	1.090	1.188	1.295	1.412
Discounted cash flows project	0.000	1183.486	1043.683	1227.772	1381.429
NPV = Sum of discounted cash flows
NPV Project =	4836.37
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

2

Year	0	1	2	3	4
Cash flow stream	0.000	1290.000	1240.000	1590.000	1950.000
Discounting factor	1.000	1.170	1.369	1.602	1.874
Discounted cash flows project	0.000	1102.564	905.837	992.749	1040.618
NPV = Sum of discounted cash flows
NPV Project =	4041.77
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

3

Discount rate	23.000%
Year	0	1	2	3	4
Cash flow stream	0.000	1290.000	1240.000	1590.000	1950.000
Discounting factor	1.000	1.230	1.513	1.861	2.289
Discounted cash flows project	0.000	1048.780	819.618	854.440	851.950
NPV = Sum of discounted cash flows
NPV Project =	3574.79
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor