Financial Technology Center - School of Business - Central Connecticut State University

A real estate investment has the following expected cash flows:

                        Year           Cash Flows

                          1              $10,000

                          2               25,000

                          3               50,000

                          4               35,000

The discount rate is 8 percent. What is the investment’s present value?

Financial calculator solution.
We could solve this problem by finding the present value of each of these cash flows individually and then summing the results. However, that is the hard way. Instead, we will use the NPV function.

This function is defined as:

NPV ( Rate, Cash Flow at t=0, {Cash Flow at t=1 , Cash Flow at t=2 , Cash Flow at t=3 ,Cash Flow at t=4 , ........}) 

                       Year           Cash Flows

                          0                     0

                          1              $10,000

                          2               25,000

                          3               50,000

                          4               35,000

NPV(8,0,{10000,25000,50000,35000})

Output:  PV = ?