You have just purchased an investment that generates the following cash flows for the next four years. You are able to reinvest these cash flows at 6.6 percent, compounded annually. End of year 1. $3,593 2. $3,607 3. $2,836 4. $396 What is the present value of this investment if 6.6 percent per year is the appropriate discount rate?

Total PV= $9,192.58

Explanation:

Giving the following information:

You can reinvest these cash flows at 6.6 percent, compounded annually. End of year 1. $3,593 2. $3,607 3. $2,836 4. $396

To calculate the present value, we need to use the following formula on each cash flow:

PV= FV/(1+i)^n

Cf1= 3,593/1.066= 3,370.55

Cf2= 3,607/1.066^2= 3,174.18

Cf3= 2,836/1.066^3= 2,341.18

Cf4= 396/1.066^4= 306.67

Total PV= $9,192.58

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