Question

D Question 1 1 pts You expect to receive a cash flow of 117 in one year and a cash flow of 304 in two years. How much is this worth to you today given an interest rate of 3%?

Answer 1

Present Value of the Cash Flows

The Present Value of the Cash Flow is calculated by using the following formula;

Present Value = CF1/{1/(1 + r)¹} + CF2/{1 / (1 + r)²}

= $117/{1/(1 + 0.03)¹} + $304/{1/(1 + 0.03)²}

= [$117/1.03] + [$304/1.06090]

= $113.59 + $286.55

= $400.14

“Hence, The Worth of the Year 1 and Year 2 cash flow today would be $400.14”