What is the value on 1/1/95 of the following cash flows?     Date Cash Received                                         Amount of Cash             12/31/96                                                          $100             12/31/97                                                          $200             12/31/98                                                          $100             12/31/99                                                          $100             12/31/00                                                          $100          Use a 10% discount rate and round your answer to the nearest $1.

Essentials Of Investments
11th Edition
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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What is the value on 1/1/95 of the following cash flows?

 

  Date Cash Received                                         Amount of Cash

            12/31/96                                                          $100

            12/31/97                                                          $200

            12/31/98                                                          $100

            12/31/99                                                          $100

            12/31/00                                                          $100

 

       Use a 10% discount rate and round your answer to the nearest $1.

Expert Solution
Step 1

We need to discount the cash flows to find their present value as on 1/1/95. We can sum them to find the total net present value. 

Since we need to find the PV at a date two years previous to the first date mentioned, we will assume this is year 0. The earliest payment is therefore at the end of year 2, and the last payment is at the end of year 6. 

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