Question

A project is expected to produce cash flows of $48,000, $39,000, and $15,000 over the next three years, respectively. After three years, the project will be worthless. What is the present value of this project if the applicable discount rate is 15.25 percent?

Answer 1

Answer:

The Present value of the project will be 80809.08

Explanation:

Cash Flows:

1. 48000
2. 39000
3. 15000

Discount rate=i= 15.25% or 0.1525

The formula for calculating the present value is

P.V=F.V{1÷(1+i)^n}

• For the first year

P.V=4800{1÷(1+0.1525)} = 41648.59

• For the second year

P.V= 39000{1÷(1+0.1525)^2}= 29361.80

• For the third year

P.V= 15000{1÷(1+0.1525)^3} = 9798.69

by adding all these we will get the present value of the project that is "80809.08"