a. Find present value of the following cash flows at 3% rate: CF0 = -1000; CF1...

a. Find present value of the following cash flows at 3% rate: CF0 = -1000; CF1 = 300; CF2 = 560; CF3 = -90; CF4 = 250. b. What is the future value of these cash flows?

Solutions

Expert Solution

Discount rate	3.000%
Year	0	1	2	3	4
Cash flow stream	-1000	300	560	-90	250
Discounting factor	1.000	1.030	1.061	1.093	1.126
Discounted cash flows project	-1000.000	291.262	527.854	-82.363	222.122
NPV = Sum of discounted cash flows
NPV	-41.13
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

compound rate	3.000%
Year	0	1	2	3	4
Cash flow stream	-1000	300	560	-90	250
compounding factor	1.126	1.093	1.061	1.030	1.000
compounded cash flows project	-1125.509	327.818	594.104	-92.700	250.000
FV = Sum of compounded cash flows
FV=	-46.29
Where
compounding factor =	(1 + compound rate)^(Corresponding period in years)
compounded Cashflow=	Cash flow stream*compounding factor

jeff jeffy answered 1 year ago

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