Answer:
Present value is given as : [tex]\frac{1}{[1+i]^{n}}\times cash flow[/tex]
Therefore Present Value for year one is
=[tex]\frac{1}{[1+0.08]^{1}}\times 450,000[/tex]
=$416,666.6
Similarly Present Value for year two is
=[tex]\frac{1}{[1+0.08]^{2}}\times 560,000[/tex]
=$480,109.7
Present Value for year three is
=[tex]\frac{1}{[1+0.08]^{3}}\times 750,000[/tex]
=$595,374
Present Value for year four is
=[tex]\frac{1}{[1+0.08]^{4}}\times 875,000[/tex]
=$643,151
Present Value for year five is
=[tex]\frac{1}{[1+0.08]^{5}}\times 1,000,000[/tex]
=$680,583
Therefore the net present value is :
=$416,666.6+$480,109.7+$595,374+$643,151+$680,583
=$1,845,510.5
