The appropriate discount rate for the following cash flows i

The appropriate discount rate for the following cash flows is 9 percent compounded quarterly.

Year Cash Flow

1 $890

2 970

3 0

4 1,560

What is the present value of the cash flows?

Solution

Discount Rate 9% Year 0 1 2 3 4 CF 890 970 0 1560 PV DCF@9% 814.2106 811.8302 0 1092.727 NPV 2718.767 The formula for PV is CF/(1+(DISCOUNT RATE/4))^(PERIOD*4)