Question

19. Calculate present value of annual infinite cash inflow of rs 20,000 if rate of interest is 8.00%

Answer 1

Present value = 2500

Step-by-step explanation:

Given,

Rate of interest = 8.00 %

Payment amount = 20000

Present value = ?

We know that ,

Present value = $\frac{P_m_t}{r}$

Where,

$P_m_t$ = payment amount

r = rate of interest

Put the values ,

Present value = $\frac{20000}{8}$

Present value = 2500

Answer 2

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Present Value = 2500

KnOw more :-

CASH IN FLOW

• It means that cash is going into the company.
• E.g : Receipt of a bank loan, Interest on savings and Investments and Shareholder investments etc

CASH OUT FLOW

• It means cash is going out of the company.
• E.g: Purchase of stock, Raw materials or tools, Wages, Rents and Daily operating expenses, Dividend payments, Income tax etc