3-15 PV of Multiple Cash Flows Example Your auto dealer gives you the choice to pay $15,500 cash now, or make three payments: $8, 000 now and $4,000 at the end of the following two years. If your cost of money is 8%o, which do you prefer? Immediatepayment.000.00 PV= 4.000 3.703.70 (1+08) PV 4.000 3.429.36 (1+.08) Total pv=$15,133.06 Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001©The McGraw-Hill Companies, Inc.,2001 3- 15 Irwin/McGraw-Hill PV of Multiple Cash Flows Example Your auto dealer gives you the choice to pay $15,500 cash now, or make three payments: $8,000 now and $4,000 at the end of the following two years. If your cost of money is 8%, which do you prefer? Total PV $15,133.06 3,429.36 3,703.70 8,000.00 2 1 (1 .0 8) 4,000 2 (1 .0 8) 4,000 1 Immediatepayment = = = = = + + PV PV