Present Value of Uneven Cash Flows

An investor is evaluating a series of cash flows from an investment project. The cash flows are as follows:

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

The investor discounts these cash flows at an annual rate of 8%. To determine the present value (PV) of these uneven cash flows, the investor needs to calculate the present value for each cash flow and then sum them up. The present value of a future cash flow can be calculated using the formula:

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

where:

• CF = Cash Flow
• r = discount rate
• n = year in which the cash flow occurs

What is the total present value of the cash flows?