Determine the present value of the continuous cash flow

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1. A new channel production facility that is under construction is expected to be in full commercial operation one year from now. Once in full operation, the facility will generate $95,000 cash profit daily over the plant's services life of 10 years. Determine the equivalent present worth of the future cash flows generated by the facility at the beginning of commercial operation, assuming A) 10% interest compounded daily, with the daily flows. B) 10% compounded continuously, with the daily flow series approximate by a uniform continuous cash flow function. Also, compare the difference between part a discrete (daily) and part b continuous compounding.

2. Income from a project is expected to decline at a constant rate from a initial value of $500,000 at time 0 to a final value of $40,000 at the end of year 3. If interest is compounded continuously at a nominal annual rate of 11%, determine the present value of this continuous cash flow.

3. A sum of $16,000per year will be received uniformly over a five-year period beginning two years from today. What is the present value of this deferred- funds flow if interested is compounded continuously at a normal rate of 9%.

Reference no: EM13223905

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