Calculating present value of a stream of cash flows
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What would be the present value of receiving $100, $200, $300, at the end of 1, 2, 3 years respectively at 8% annual compound interest.
Do not use MS Excel or present value tables.
Please provide formulas/calculations for your response.
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Solution:
Present Value of a single future cash flow =Future value/(1+interest rate)^no. of period
Present Value of multiple cash flows= sum of PV's of all future cash flows
=100/(1+8%)^1+200/(1+8%)^2+300/(1+8%)^3
=$502.21
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