identified an investment project with the following cash flows. Year Cash Flow 1 $850 2 1,190 3 1,450 4 1,600 a. If the discount rate is 7 percent, what is the present value of these cash flows

Total present value = $4,238.04

Explanation:

Giving the following information:

Cf1 = $850

Cf2 = 1,190

Cf3 = 1,450

Cf4 = 1,600

discount rate = 7 percent

To calculate the present value, we need to use the following formula on each cash flow:

PV = Cf / (1+i) ^n

Cf1 = 850/1.07 = 794.39

Cf2 = 1,190/1.07^2 = 1,039.39

Cf3 = 1,450/1.07^3 = 1,183.63

Cf4 = 1,600/1.07^4 = 1,220.63

Total present value = $4,238.04