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Consider the following:
The required rate of return is 14%. Find the minimum amount you would have to receive as a
cash flow in year 3 and still recommend the project. Answer to 2 decimals, for example
100.12.YearCash Flow0-$8,0001$2002$3003 ?4$6005$700
Solution
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=200/1.14+300/1.14^2+x/1.14^3+600/1.14^4+700/1.14^5[where x=cash flow for year 3]
8000 =200/1.14+300/1.14^2+x/1.14^3+600/1.14^4+700/1.14^5
8000=1125.085087+x/1.14^3
(8000-1125.085087)=x*0.674971516
x=6874.914913/0.674971516
=$10185.49(Approx)=cash flow for year 3.

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Consider the followingThe required rate of return is 14. Find th.pdf

  • 1. Consider the following: The required rate of return is 14%. Find the minimum amount you would have to receive as a cash flow in year 3 and still recommend the project. Answer to 2 decimals, for example 100.12.YearCash Flow0-$8,0001$2002$3003 ?4$6005$700 Solution Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period) =200/1.14+300/1.14^2+x/1.14^3+600/1.14^4+700/1.14^5[where x=cash flow for year 3] 8000 =200/1.14+300/1.14^2+x/1.14^3+600/1.14^4+700/1.14^5 8000=1125.085087+x/1.14^3 (8000-1125.085087)=x*0.674971516 x=6874.914913/0.674971516 =$10185.49(Approx)=cash flow for year 3.