Zevon Co. has identified an investment project with the following cash flows. Year : Cash Flow ...

Question:

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

Year : Cash Flow

1 : $ 1,310

2 : $1,270

3 : $1,600

4 : $1,960

1: Assume the discount rate is 11 percent, what is the present value of these cash flows?

2: What is the present value at 16 percent?

3: What is the present value at 22 percent?

Present Value of Cash Flows:

The value of money depreciates with time. So, the worth of $1 today is more than that at a later date. The present value of any future payment received signifies the worth of that payment at the current date, and it is discounted at the given rate of return.

Answer and Explanation:

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a. Present value of cash flows at 11% discount rate is $4,671.96

b. Present value of cash flows at 16% discount rate is $4,180.67

c. Present value...

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How to Calculate Present Value of an Investment: Formula & Examples

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Chapter 24 / Lesson 15
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This lesson will provide an overview of how to calculate the present value of an investment. Various examples will also be explored using the present value formula. You can test your knowledge of the material with a quiz at the end of the lesson.


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