how to calculate present value of future cash inflows from an asset

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Question

Charley has a typing service. He estimates that a new computer will result in increased cash inflow $2,300 in Year 1, $2,700 in Year 2 and $3,500 in Year 3. (Ignore income taxes.)

If Charley's required rate of return is 6%, the most that Charley would be willing to pay for the new computer would be:

a. $6,872

b. $4,703

c. $7,053

d .$7,512

 

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