Present value problem...?
My pancake fatory will produce cash flows of $100,000 this year, and I expect cash flow to keep a pace with any increase in the general level of prices. The interest rate currently is 6,%, and I anticipate inflation of about 2%.
What is the present value of my factory's cash flows for years 1 through 5?
Comments
After 1 Yr - CF $100K, PV $94K
After 2 - CF $202K, PV $185K
After 3 - CF $306K, PV $272K
After 4 - CF $412K, PV $356K
After 5 - CF $520K, PV $437K