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30.07.2021 •
Business
Describe what a period represents in time-value of money computations by completing the following sentence: The present value or future value of a sum of money can be calculated as long as we know the number of (days, times, years) that interest will be compounded within one (year, month, day). g
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Ответ:
Net present value = $506.80
Explanation:
Provided details are
Cash outflow at present = $13,400
Present value will be same as is incurred today.
Cash inflow = $5,400 for 3 years and $2,400 in 4th year
Rate of required return = 14.2%
Present value factor for 3 years cumulative = 2.314
Present value factor for 4th year = 0.588
Present value of cash inflow = $5,400
2.314 + $2.400 
0.588
= $12,495.60 + $1,411.2 = $13,906.80
Thus, net present value = Present value of cash inflow - Present value of cash outflow
= $13,906.80 - $13,400 = $506.80