Question

An entrepreneur wanting to buy the machine and use it for three years , is intended to receive the income of 2 million dollars. , And this income is distributed as follows : in the first year - 400 thousand dollars. , The second - 1 million dollars. , in the third - 600 thousand dollars. It is known that the interest rate is 8 %. What will be the purchase price of the machine ?

Answer 1

In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present values (PVs)—the sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question. Present value may also be expressed as a number of years' purchase of the future undiscounted annual cash flows expected to arise.

$$DCF = \frac{CF_1}{(1 + r)^1} + \frac{CF_2}{(1 + r)^2} + \cdots + \frac{CF_n}{(1 + r)^n}$$

Purchase price = 0,4/(1+0.08) + 1/(1+0.08)^2 + 0.6/(1+0.08)^3 = 1,704 million