You are considering a project which will provide annual cash inflows of $4,500,$5,700,and $8,000 at the end of each year for the next three years,respectively.What is the present value of these cash flows,given a 9 percent discount rate?

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Quizplus · Accepted Answer

To calculate the present value of these cash flows, we use the formula for the present value of a single cash flow: $PV = \frac{FV}{(1 + r)^n}$, where $PV$ is the present value, $FV$ is the future value (cash inflow), $r$ is the discount rate, and $n$ is the number of periods.1. For the first cash inflow of $4,500 at the end of year 1: $PV = \frac{4,500}{(1 + 0.09)^1} = \frac{4,500}{1.09} = \$4,128.44$2. For the second cash inflow of $5,700 at the end of year 2: $PV = \frac{5,700}{(1 + 0.09)^2} = \frac{5,700}{1.1881} = \$4,798.17$3. For the third cash inflow of $8,000 at the end of year 3: $PV = \frac{8,000}{(1 + 0.09)^3} = \frac{8,000}{1.295029} = \$6,176.24$Adding these present values together: $4,128.44 + 4,798.17 + 6,176.24 = \$15,102.85$, which rounds to $15,103.

You Are Considering a Project Which Will Provide Annual Cash