Present Value of Cash Flows Calculation

A financial analyst is considering an investment project that will yield cash flows of $800 at the end of year 1, $1,500 at the end of year 2, and $2,200 at the end of year 3. The analyst plans to discount these cash flows to their present value using a discount rate of 5% compounded annually. The goal is to determine the total present value of these cash flows to evaluate the feasibility of the project.

To calculate the present value of each cash inflow, you can use the present value formula:

$$PV = rac{CF}{(1 + r)^n}$$

where:

- $PV$ is the present value
- $CF$ is the cash flow
- $r$ is the discount rate
- $n$ is the number of periods until the cash flow is received