can somewhy tell me why I cant calculate the same method for year 8-9 as with year 1-5? for example in year 8-9 why cant I go n=2, i/y=8 pmt = -2000 and cpt -> pv like i did from year 1-5?..i get the answer of 3566.53 for year 8 and 9 together but in the solution it calculated year 8 and 9 seperately and got 2080…why? If i did it this way i would get answer C but its answer B thanks A firm is evaluating an investment that promises to generate the following annual cash flows: End of Year Cash Flows 1 $5,000 2 $5,000 3 $5,000 4 $5,000 5 $5,000 6 -0- 7 -0- 8 $2,000 9 $2,000 Given BBC uses an 8% discount rate, this investment should be valued at: A) $19,963. B) $22,043. C) $23,529. -------------------------------------------------------------------------------- Click for Answer and Explanation PV(1 - 5): N = 5; I/Y = 8; PMT = -5,000; FV = 0; CPT ¨ PV = 19,963 PV(6 - 7): 0 PV(8): N = 8; I/Y = 8; FV = -2,000; PMT = 0; CPT ¨ PV = 1,080 PV(9): N = 9; I/Y = 8; FV = -2,000; PMT = 0; CPT ¨ PV = 1,000 Total PV = 19,963 + 0 + 1,080 + 1,000 = 22,043.
because your calculation is only discounting the payments for 2 periods instead of 9… this is a REALLY REALLY basic calculation
my bad, ive been reviewing qbank now for a few hrs my brain must not be working right. thanks for the post
you could do fv=3566.53 n=7 i/y=8 cpt PV after and get the same answer
Easiest way to do this is use the cash flow and NPV function on the calculator: CF0 = $0 CF1 = $5000 F1 = 5 CF2 = 0 F2= 2 CF3 = $2000 F3 = 2 I = 8 Compute NPV = $22,044