Answer to Question #66172 in Economics of Enterprise for Kari Stanislaus

Question

Assume you will receive $2,500 a year in Years 1 through 5, $6,000 a year in years 6 through 8, and $8,000 in year 9 with all cash flows to be received at the end of the year. If you require a return of 12 percent annually, what is the present value of these cash flows?

Answer 1

PV=R_1/〖(1+i)〗^1 +R_2/〖(1+i)〗^2 +⋯+R_n/〖(1+i)〗^n
PV=2500/(1+0.12)^1 +⋯+2500/(1+0.12)^5 +6000/(1+0.12)^6 +⋯+6000/(1+0.12)^8 +8000/(1+0.12)^9
NPV=20074


Answer
PV=20 074 $