Question

Compute the present value of each of the following cash flows using a discount rate of 13 per cent (i) Rs 2,000 cash outflow immediately (ii) Rs 6,000 cash inflow one year from now. (ii) Rs 6,000 cash inflow two years from now. (iv) Rs 4.000 cash outflow three years from now (v) Rs 7,000 cash inflow three years from now. (vi) Rs 3,000 cash inflow four years from now (vii) Rs 4,000 cash inflow at the end of each of the next five years. (vii) Rs 4,000 cash inflow at the beginning of each of the next five years.​

Answer 1

Answer:

flow computer present value of each of the following 1000 cash or flow - 6000 into 4000 answer 890000 and we have to go cache in for the beginning of the next 5 years soon cache into 7 into - 99 answer 2900000000000000

Answer 2

Concept:

Present Value-

The concept of present value states that an amount of money today is worth more than the same amount in the future.

Present Value = Future Value x Present Value Factor

(Using the Present Value Factor table)

Given:

Rate = 13%

Find:

Present Value

Solution:

1. PV = 2000 x 1 = 2000
2. PV = 6000 x 0.884 = 5309.73
3. PV = 6000 x 0.783 = 4898.88
4. PV = 4000 x 0.693 = 2772.20
5. PV = 7000 x 0.693 =4851.35
6. PV = 3000 x 0.613 = 1839.95
7. PV = 4000 x 3.517 = 14068.92
8. PV = 4000 x (1 + 3.517) = 18068.92

Hence, we can conclude that Present value is significant because it allows investors to determine whether the price they pay for an investment is reasonable.

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