Respuesta :
Answer:
$280,894.67
Explanation:
Present value can be found by discounting the cash flows at the discount rate.
Present value can be calculated using a financial calculator:
Cash flow for year one = 5,600
Cash flow for year two = $48,200
Cash flow for year three = $125,000 + $250,000 = $375,000
Discount rate =16%
Present value = $280,894.67
I hope my answer helps you
The worth of business today would be $281,014.8.
What is the calculation of present value?
The formula for discount factor:
[tex]Df =\frac{1}{ 1*(1+r)^{n} }[/tex]
Therefore, Df for year 1 as per the above formula at 16% discount would be:
[tex](1+0.16)^{-1} \\= 0.862[/tex]
Similarly, for year 2 Df would be 0.743, and year 3 Df would be 0.641.
Now, the present value for all three years would be:
[tex]0.862* 5,600 = 4827.20\\ 0.743* 48,200= 35,812.6\\0.641 * 125,000 = 80,125[/tex]
Therefore, the total present value at the end of three years would be:
[tex]0.641 * 250,000\\=160,250[/tex]
Hence, the net worth of the business today would be:
[tex]160,250+4827.20+35,812.6+80,125\\=281,014.8[/tex]
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