Bell Company is considering a project that would provide a single cash inflow eight years from now of $80,000. What is the most that Bell would be willing to spend on this project if the discount rate is 16%?
A) $262,295
B) $24,400
C) $288,400
D) $22,191

Question

Quizplus · Accepted Answer

Using the formula for present value: PV = FV / (1+r)^n
where PV is the present value, FV is the future value or cash inflow, r is the discount rate, and n is the number of periods.
Substituting the values:
PV = 80,000 / (1+0.16)^8 = $24,400
Therefore, Bell should be willing to spend $24,400 on this project.

Bell Company Is Considering a Project That Would Provide a Single