Year |
Payment |
Present value |
1 |
$ 50,000.00 |
$ 44,444.44 |
2 |
$ 40,000.00 |
$ 31,604.94 |
3 |
$ 25,000.00 |
$ 17,558.30 |
4 |
$ 20,000.00 |
$ 12,485.90 |
$ 1,06,093.58 |
The final answer and corresponding figures may be different a little bit due to Factor table round off.
Please go through the given below method of calculating PV of cash flows to understand this.
Year |
Payment (A) |
Discounting factor (B) |
Present value (C=A x B) |
1 |
$ 50,000.00 |
0.888889 |
$ 44,444.44 |
2 |
$ 40,000.00 |
0.790123 |
$ 31,604.94 |
3 |
$ 25,000.00 |
0.702332 |
$ 17,558.30 |
4 |
$ 20,000.00 |
0.624295 |
$ 12,485.90 |
Total present value of the cash flows |
$ 1,06,093.58 |
Replace the Discounting factor from the table given to you to get exact amount to fill.
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