A financial analyst is evaluating a series of cash flows generated by an investment project. The expected cash flows over the next four years are as follows: Year 1: $500 Year 2: $800 Year 3: $1000 Year 4: $600 The company's required rate of return is 8% per annum. The analyst needs to find the present value (PV) of these uneven cash flows to determine whether the investment is worthwhile. What is the present value of the cash flows to two decimal places?

Exam

CFA Level 1

Section

Difficulty

Quantitative Methods

Calculating Present Value of Uneven Cash Flows

Very Hard Time Value Of Money Uneven Cash Flows

A financial analyst is evaluating a series of cash flows generated by an investment project. The expected cash flows over the next four years are as follows:

Year 1: $500
Year 2: $800
Year 3: $1000
Year 4: $600

The company's required rate of return is 8% per annum. The analyst needs to find the present value (PV) of these uneven cash flows to determine whether the investment is worthwhile.

What is the present value of the cash flows to two decimal places?

PV = $2,172.66

PV = $1,368.65

PV = $1,400.00

Hint

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