Computing Present Value of Several Single Amounts The following cash inflows are predicted over the next five years: $24,000, $36,000, $48,000, $60,000 and $72,000 at the end of years one, two, three, four, and five, respectively.   Required Compute the total present value of the five cash flows at the beginning of year one, assuming annual compounding at a 4% interest rate. Round final answer to the nearest whole dollar. Do not use a negative sign with your answers. $ Answer

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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.