K&W Co. has identified an investment project with the following cash flows. If the discount rate is

Question:

K&W Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18 percent? At 24 percent?

Yr. Cash Flow ($)

1 ......1,375

2 ......930

3 ......1,190

4 ......1,275

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...