Answered

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he appropriate discount rate for the following cash flows is 8 percent compounded quarterly. Year Cash Flow 1 $700 2 700 3 0 4 1,100 What is the present value of the cash flows

Sagot :

Answer:

Thus, the present value is $2045.52.

Explanation:

Use the below formula to find the present value:

Present value = FV ÷ (1 + r/4)^(n*4)

Present value :

[tex]=\frac{700}{(1 + \frac{0.08}{4} )^{1 \times 4} } + \frac{700}{(1 + \frac{0.08}{4} )^{2 \times 4} } + \frac{0}{(1 + \frac{0.08}{4} )^{3 \times 4} } +\frac{1100}{(1 + \frac{0.08}{4} )^{4 \times 4} } \\ \\= \frac{700}{1.0824}+\frac{700}{1.1716} +0+\frac{1100}{1.3727} \\= 2045.52[/tex]

Thus, the present value is $2045.52.

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