5.The appropriate discount rate for the following cash flows is 14 percent compounded quarterly. Year Cash...

5.The appropriate discount rate for the following cash flows is 14 percent compounded quarterly.

Year	Cash Flow
1	$1,000
2	600
3	0
4	1,300

Required:

What is the present value of the cash flows?

Expert Solution

Given that, discounted rate for cash flows is 14% compounded quarterly.
So, quarterly interest rate =14%/4=3.5%

Effective annual rate = (1+quarterly interest rate)^4 -1= (1+3.5%)^4 -1 =(1.035)^4 -1=1.147523 -1 =0.147523=14.7523%
Cash flows are:
Year 1:$1000
Year 2:$600
Year 3:$0
Year 4:$1300

We can find the present value of the cash flows using the following formula:
Present value=Cash flow in year 1/(1+Effective annual rate)^1+Cash flow in year 2/(1+Effective annual rate)^2+Cash flow in year 3/(1+Effective annual rate)^3+Cash flow in year 4/(1+Effective annual rate)^4

Effective annual rate = 14.7523%

Present value=$1000/(1+14.7523%)^1+$600/(1+14.7523%)^2+$0/(1+14.7523%)^3+$1300/(1+14.7523%)^4
=$1000/(1.147523)^1+$600/(1.147523)^2+$0/(1.147523)^3+$1300/(1.147523)^4
=$1000/1.147523+$600/1.316809036+$0/1.511068655+$1300/1.733986036
=$871.4422282+$455.6469341+$0+$749.7176869
=$2076.807
The present value of the cash flows=$2076.807

jeff jeffy answered 1 year ago

The appropriate discount rate for the following cash flows is 16 percent compounded quarterly. Year Cash...

The appropriate discount rate for the following cash flows is 16 percent compounded quarterly. Year Cash Flow 1 $900 2 500 3 0 4 1,200 Required: What is the present value of the cash flows? A) $1,739.71 B) $1,810.19 C) $1,775.21 D) $1,810.72 E) $278.95

If the appropriate discount rate for the following cash flows is 13 percent, what is the...

If the appropriate discount rate for the following cash flows is 13 percent, what is the net present value of these cash flows assuming the initial cost is $700? Should you go through with this investment? YEAR CASH FLOW 0- $ -700 1- 100 2- 200 3- 300 4- 400

If the appropriate discount rate for the following cash flows is 11.7 percent per year, what is the present value of the cash flows?

If the appropriate discount rate for the following cash flows is 11.7 percent per year, what is the present value of the cash flows?YearCash Flow1$21,6002$25,9003$38,7004$16,200 Group of answer choices$71,407.19$74,221.80$78,270.77$80,407.16$81,121.03

Given a 6 percent discount rate compounded quarterly, what is the present value of a perpetuity...

Given a 6 percent discount rate compounded quarterly, what is the present value of a perpetuity of $100 per month if the first payment does not begin until the end of year five? Please give explanation and formula! Thanks!

Discounted Cash Flow Analysis. If the appropriate discount rate for the following cash flows is 7.3%,...

Discounted Cash Flow Analysis. If the appropriate discount rate for the following cash flows is 7.3%, what is the present value of the cash flows? Please show me how to do this problem using a Texas Instruments BAII Plus Business calculator. Year Cash Flow 1 $1,200 2 1,100 3 800 4 600

If the relevant discount rate for the following set of cash flows is 7 percent, the...

If the relevant discount rate for the following set of cash flows is 7 percent, the profitability index is . If the discount rate is 15 percent, the profitability index is . If the discount rate is 23 percent, the profitability index is . (Round your answers to 3 decimal places. (e.g., 32.162)) Year Cash Flow 0 −$9,900 1 5,400 2 4,400 3 3,900

What is the PV of the following cash flows, assuming a 5% discount rate?

What is the PV of the following cash flows, assuming a 5% discount rate?Initial investment – year 0: $(1,000,000)Year 1 cash flows: $100,000Year 2 cash flows: $100,000Year 3 cash flows: $100,000Year 4 -sale: $1,200,000

You are given the following cash flow information. The appropriate discount rate is 4 percent for...

You are given the following cash flow information. The appropriate discount rate is 4 percent for years 1-6 and 6 percent for years 7-12. Payments are received at the end of each year. Year Amount 1-6 $25,000 7-12 $35,000 What is the present value of the income stream above? ***Please show your work***

Using the following yearly cash flow and an interest rate of 6% /year compounded quarterly

Using the following yearly cash flow and an interest rate of 6% /year compounded quarterly year 0 _______1_______2_______3_______4_______5__ cash flow, $ 5000 6500 8000 determine: The present value (present worth).The equivalent uniform annual amount.How much must be invested each month into an account paying 18% /year compounded monthly to accumulate $200,000 in four years?The bank states that a new car loan with monthly payments is available for three years at an annual interest rate of 9%.What would be the monthly payments on...

You are quoted an interest rate of 14% per year, compounded quarterly. What is the effective...

You are quoted an interest rate of 14% per year, compounded quarterly. What is the effective yearly interest rate?You are quoted an interest rate of 14% per year, compounded quarterly. What is the effective yearly interest rate?

Question