Annual cash inflows from two competing investment projects are given below: Year 1 423 + 4 The discount rate is 12%. Year Investment A $ 2,000 3,000 4,000 5,000 $ 14,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment. 1 2 3 4 ليا Investment B $ 5,000 4,000 3,000 2,000 $ 14,000 Present Value of Cash Flows Investment A Investment B

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.