The present value of the following cash flow stream is $7,200 when discounted at 10 percent annually. What is the value of the missing cash flow at year 2?
Year Cash
Flow
1
3,100
2
3
2,200
4
1,500
A. $2,500
B. $2,250
C. $2,062
D. $1,952
E. $1,842
Please help urgently. No work needs to be shown.
Present value=Cash flows*Present value of discounting factor(rate%,time period)
7,200=3,100/1.1+Cash flow for year 2/1.1^2+2,200/1.1^3+1,500/1.1^4
7,200=5495.59456=Cash flow for year 2/1.1^2
Cash flow for year 2=(7200-5495.59456)*1.1^2
=$2,062(Approx).
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