# What will be the present value if the discount rate is changed to 15% ?

26 finance questions | Business & Finance homework help

The present value of cash flows at a 10% discount rate is \$2738. This formula is used to calculate PV: FV/ (1+r)n where FV (future value, cash flow), and r are the discount rates. n is how many periods. This would be FV=900, and r = 0.10 (10) Thus PV = 900/1.104= \$2,738

This would mean that the current value would drop to \$2,531, if 15% were the new discount rate. The same formula can be used to calculate this, but with an updated value of r. PV = 900/1.154 = 2,531. It can thus be observed that the discount rate has a greater impact on current values.

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