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Jenni's Diner has expected net annual cash flows of $16,200, $18,600, $19,100, and $19,500 for the next four years, respectively. At the end of the fourth year, the diner is expected to be worth $57,900 cash. What is the present value of the diner at a discount rate of 11.6 percent

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Kolawole845

Answer:

Present value=$93,090.25

Explanation:

The worth of the dinner is the sum of the present value of the individual annual cash flows and the its value at the end of year 4.

Present Value = Cash flow× (1+r)^(-n)

r- discount rate , n- number of year

Present value = 16,200 × 1.116^(-1) + 18,600 ×1.116^(-2) + 19,100 × 1.116^(-3)  + 19,500 × 1.116^(-4) + 57,900× 1.116^(-4)

Present value= 93,090.248

Present value=$93,090.25

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