In: Finance
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?
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 |