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30 January, 10:51

identified an investment project with the following cash flows. Year Cash Flow 1 $850 2 1,190 3 1,450 4 1,600 a. If the discount rate is 7 percent, what is the present value of these cash flows

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  1. 30 January, 12:14
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    Total present value = $4,238.04

    Explanation:

    Giving the following information:

    Cf1 = $850

    Cf2 = 1,190

    Cf3 = 1,450

    Cf4 = 1,600

    discount rate = 7 percent

    To calculate the present value, we need to use the following formula on each cash flow:

    PV = Cf / (1+i) ^n

    Cf1 = 850/1.07 = 794.39

    Cf2 = 1,190/1.07^2 = 1,039.39

    Cf3 = 1,450/1.07^3 = 1,183.63

    Cf4 = 1,600/1.07^4 = 1,220.63

    Total present value = $4,238.04
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