Question

Paper Flyer Co. expects the following cash flows from its manufacturing plant in India over the...

Paper Flyer Co. expects the following cash flows from its manufacturing plant in India over the next 6 years

Year

Annual Cash Flows

1 $5,000,000
2 $2,750,000
3 $3,750,000
4 $6,400,000
5 $6,800,000
6 $4,500,000

The CFO of the company believes that an appropriate annual interest rate on this investment is 7.5%. What is the present value of this uneven cash flow stream ?

$15,921,988

$29,200,000

$22,494,179

$22,700,000

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Answer #1

Year Annual Cash Flows Present Value factor Present Value (A) (B) (A) x (B) $50,00,000 0.930233 [1/(1+7.5%)^1] $46,51,163 $27

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