D Question 16 4 pts You are given the following cash flows. What is the present value if the discount rate is 12%, annually compounding? At the end of year Cash Flow $2,000 $2,000 $2,000 $2,000 O $5,302 $4,804 O $2,804 O $4,289 O $3,277
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Question
D Question 16 4 pts You are given the following cash flows. What is the present value if the discount rate is 12%, annually compounding? At the end of year Cash Flow $2,000 $2,000 $2,000 $2,000 O $5,302 $4,804 O $2,804 O $4,289 O $3,277
Solution
Calculation of Present value :
At the End of year
Cash Flow
PV of $ 1 (12%)
PV
CF
Calculation
PVF
CF*PVF
0
$ 
= 1/(1+12%)^0
1.00000
$ 
1
$ 1
= 1/(1+12%)^1
0.89286
$ 1
2
$ 2,000
= 1/(1+12%)^2
0.79719
$ 1,594
3
$ 2,000
= 1/(1+12%)^3
0.71178
$ 1,424
4
$ 2,000
= 1/(1+12%)^4
0.63552
$ 1,271
5
$ 
= 1/(1+12%)^5
0.56743
$ 
6
$ (2,000)
= 1/(1+12%)^6
0.50663
$ (1,013)
Total Present Value (Sum of PV)
$ 3,277
Calculation of Present value : 

At the End of year 
Cash Flow 
PV of $ 1 (12%) 
PV 


CF 
Calculation 
PVF 
CF*PVF 
0 
$  
= 1/(1+12%)^0 
1.00000 
$  
1 
$ 1 
= 1/(1+12%)^1 
0.89286 
$ 1 
2 
$ 2,000 
= 1/(1+12%)^2 
0.79719 
$ 1,594 
3 
$ 2,000 
= 1/(1+12%)^3 
0.71178 
$ 1,424 
4 
$ 2,000 
= 1/(1+12%)^4 
0.63552 
$ 1,271 
5 
$  
= 1/(1+12%)^5 
0.56743 
$  
6 
$ (2,000) 
= 1/(1+12%)^6 
0.50663 
$ (1,013) 
Total Present Value (Sum of PV) 
$ 3,277 

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