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31 October, 06:49

What is the present value of a stream of cash flows of $125,000 at a discount rate of 7%?

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  1. 31 October, 07:15
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    Present value = Cashflow

    Discount rate

    Present value = $125,000

    0.07

    Present value = $1,785.71

    Explanation:

    In this case, we will apply the formula for present value of perpetuity, which equals cashflow divided by the discount rate. The present value of perpetuity formula is applied because the cashflows are indefinite ie the number of years were not provided.
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