Question

please show work!!

John Keene recently invested $2,250 in a project that is promising to return 10 percent per year. The cash flows are expected to be as follows: WN Year End of Year Cash Flow $588 $553 $573 $?? $583 Note that the cash flow in year 4 is missing. Determine the Year 4 missing cash flow that will make the present value of this series equal to the amount John invested (that is, CFO = -2250)? Round your answer to 2 decimal places and record your answer without a dollar sign and without commas.

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

в C D E F 1 Required return 10% Year PV Cash Flow -2250 588 553| 573 PVF(10%) 1.00000 0.90909 0.82645 0.75131 0.68301 0.62092 -2250.00 534.55 457.02 430.50 583 362.00 Cash Flow in year-4 (X) 682.17 14 15 2 Annual payments APR, compounded s.a Annual effective rate No. of Annual payments 4882 10% 10.25% 42 Present value of Annuity due 51639.60

Cell reference -

ДА в с 1 Required retur Required return 0.1 Nm 7 Year Cash Flow PV -2250 588 553 PVF(10%) =1/(1+$C$2)^B5 =1/(1+$C$2)^B6 =1/(1+$C$2)^B7 =1/(1+$C$2)^B8 =1/(1+$C$2)^B9 =1/(1+$C$2)^B10 =C5* D5 =C6*D6 =C7*D7 =C8*D8 573 583 =C10*D10 000 OEM Cash Flow in year-4 (X) =(-E5-(E6+E7+E8+E10))/D9 14 15 2 16 Annual payments APR, compounded s.a Annual effective rate No. of Annual payments 4882 0.1 =(1+C16/2)^2-1 17 42 Present value of Annuity due =PV(C17,218,-C15,,1)

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.