What is the present value of the following set of cash flows, discounted at 15% per year? Year 1 2 3 4 Cash flow $100 -$100 $200 -$200

$28.51

Explanation:

The computation of the present value of the following cash flows is as follows;

Present value factor = 1 ÷ (1 + rate of interest)^number of years

Now the present value is  

= $100 × present value factor of year 1 - $100 × present value factor of year 2 + $200 × present value factor of year 3 - $200 × present value factor of year 4

= $100 × 0.8696 - $100 × 0.7561 + $200 × 0.6575 - $200 × 0.5717

= $86.96 - $75.61 + $131.5 - $114.34

= $28.51

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