The present value of the following cash flow stream is $8,650 when discounted at 9.5 percent annually. What is the value of the missing cash flow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)   1  $2,250 2    ??? 3   2,850 4   3,450

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The present value of the following cash flow stream is $8,650 when discounted at 9.5 percent annually. What is the value of the missing cash flow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

 

1  $2,250

2    ???

3   2,850

4   3,450

Expert Solution
Step 1

Given: Present Value of Cash flow =$8650

Present value of Cash flow =$2250×PVF(9.5%,1 Year)+Cash flow×PVF(9.5%,2 Year)+$2850×PVF(9.5%,3 Year) +$3450×PVF(9.5%,4 Year)$8650=$2250×0.91324+Cash flow×0.83401+$2850×0.76165+$3450×0.69557$8650=2054.79 +Cash flow ×0.83401+2170.703+2399.717$8650-2054.79-2170.703-2399.717 =Cash flow×0.83401Cash flow ×0.83401 =2024.791Cash flow=2024.7910.83401                =2427.77

 

 

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