ercise 11-7 (Algo) Net present value and unequal cash flows LO P3 hez is considering a $210,000 investment with the following net cash flows. Gomez requires a 15% return EV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 t cash flows $86,000 $54,000 $99,000 $163,000 $38,000 Compute the net present value of this investment. Should Gomez accept the investment?

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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.