Mccann co. has identified an investment project with the following cash flows. year cash flow 1 $ 530 2 690 3 875 4 1,090 a. if the discount rate is 10 percent, what is the present value of these cash flows? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) b. what is the present value at 18 percent? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) c. what is the present value at 24 percent? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

A. $2,453.95

B. $2,039.46

C. $1,796.14

Explanation:

The computation of the Present value is shown below

= Present value of all yearly cash inflows after applying discount factor

The discount factor should be computed by

= 1 ÷ (1 + rate) ^ years

where,  

(A) Rate is 10%  

Year = 0,1,2,3,4

Discount Factor:

For Year 1 = 1 ÷ 1.1 ^1 = 0.9091

For Year 2 = 1 ÷ 1.1 ^2 = 0.8264

For Year 3 = 1 ÷ 1.1 ^3 = 0.7513

For Year 4 = 1 ÷ 1.1 ^4 = 0.6830

So, the calculation of a Present value of all yearly cash inflows are shown below

= Year 1 cash inflow × Present Factor of Year 1 + Year 2 cash inflow × Present Factor of Year 2 + Year 3 cash inflow × Present Factor of Year 3 + Year 4 cash inflow × Present Factor of Year 4

= $530 ×  0.9091  + $690 × 0.8264  + $875 × 0.7513  + $1,090 × 0.6830

= $481.82  + $570.25  + $657.40  + $744.48

= $2,453.95

(B) Rate is 18%  

Year = 0,1,2,3,4

Discount Factor:

For Year 1 = 1 ÷ 1.18 ^ 1 = 0.8475

For Year 2 = 1 ÷ 1.18 ^2 = 0.7182

For Year 3 = 1 ÷ 1.18 ^3 = 0.6086

For Year 4 = 1 ÷ 1.18 ^4 = 0.5158

So, the calculation of a Present value of all yearly cash inflows are shown below

= Year 1 cash inflow × Present Factor of Year 1 + Year 2 cash inflow × Present Factor of Year 2 + Year 3 cash inflow × Present Factor of Year 3 + Year 4 cash inflow × Present Factor of Year 4

= $530 ×  0.8475 + $690 × 0.7182  + $875 × 0.6086  + $1,090 × 0.5158

= $449.15  + $495.55  + $532.55  + $562.21

= $2,039.46

(C) Rate is 24%  

Year = 0,1,2,3,4

Discount Factor:

For Year 1 = 1 ÷ 1.24 ^ 1 = 0.8065

For Year 2 = 1 ÷ 1.24 ^2 = 0.6504

For Year 3 = 1 ÷ 1.24 ^3 = 0.5245

For Year 4 = 1 ÷ 1.24 ^4 = 0.4230

So, the calculation of a Present value of all yearly cash inflows are shown below

= Year 1 cash inflow × Present Factor of Year 1 + Year 2 cash inflow × Present Factor of Year 2 + Year 3 cash inflow × Present Factor of Year 3 + Year 4 cash inflow × Present Factor of Year 4

= $530 ×  0.8065 + $690 × 0.6504  + $875 × 0.5245  + $1,090 × 0.4230

= $427.42  + $448.75  + $458.93  + $461.04

= $1,796.14

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi