Carla Vista's Custom Construction Company is considering three new projects, each requiring an equipment investment of $23,980. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $7,630 $10,900 $14,170 2 9,810 10,900 13,080 3 13,080 10,900 11,990 Total $30,520 $32,700 $39,240

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A:

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Q: where do you get the 120% from?

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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.