Year Cash Flow1 $7252 9803 04 1,360If the appropriate discount rate fo

QUESTION

Year Cash Flow1 $7252 9803 04 1,360If the appropriate discount rate for the following cash flows is 11 percent compounded quarterly, the present value of the cash flows is? .(Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16)).Ive been trying to solve this prob
You need to find the present value for each cash flow and then add them together. The interest rate you want to use is 11/4 = 2.75 or 0.0275, the quarterly rate Cash flow for year 1: 725/(1.0275^4) = 650.45 (the numerator is the cash flow, the denominator is 1 plus the interest rate, which is 1 0.0275 = 1.0275, then raised to the power of the number of compounding periods, since there are 4 quarters, you use 4. Cash

flow for year 2: 980/(1.0275^8) = 788.81 (2 years = 8 compounding periods) Cash flow for year 3 is zero. Cash flow for year 4: 1,360/(1.0275^16) = 881.11 (4 years = 16 compounding periods) Add them up: 650.45 788.81 881.11 = 2320.37, which is the present value of the cash flows.

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