Present Value of Uneven Cash Flows Calculation

A company is evaluating an investment that will yield uneven cash flows over the next five years. The expected cash inflows are as follows:

• Year 1: $4,000
• Year 2: $6,000
• Year 3: $5,000
• Year 4: $7,500
• Year 5: $3,500

If the company's required rate of return is 10%, what is the present value (PV) of the expected cash inflows from this investment?

To calculate the present value of uneven cash flows, you will use the formula:

$$ PV =\frac{CF_1}{(1 + r)^1} +\frac{CF_2}{(1 + r)^2} +\frac{CF_3}{(1 + r)^3} +\frac{CF_4}{(1 + r)^4} +\frac{CF_5}{(1 + r)^5} $$

where:

• $$ CF_t $$ = Cash Flow at time $$ t $$
• $$ r $$ = discount rate