Answer:
The value of the missing cash flow is $4000.
Explanation:
The present value of a stream of cash flows can be calculated using the following formula for present value.
Present Value = Cash Flow 1 / (1+r) + Cash Flow 2 / (1+r)^2 + ... + Cash Flow N / (1+r)^N
Where,
As we already know the present value and the other cash flow, we will plug in these values in the formula to calculate the missing cash flow.
Let the missing cash flow be x.
7151.29 = 2000 / (1+0.11) + x / (1+0.11)^2 + 1750 / (1+0.11)^3 +
1250 / (1+0.11)^4
7151.29 = 1801.801802 + x / (1+0.11)^2 + 1279.584917 + 823.4137177
7151.29 - 3904.800437 = x / (1.11)^2
3246.489563 * (1.11)^2 = x
x = $3999.999791 rounded off to $4000
Thus the value of the missing cash flow is $4000.
