Use the following table $\text { Present Value of an Annuity of } 1$$\begin{array}{rrrr}
\text { Period } & 8 \% & 9 \% & 10 \%\
1 & .926 & .917 & .909 \
2 & 1.783 & 1.759 & 1.736 \
3 & 2.577 & 2.531 & 2.487
\end{array}$ A company has a minimum required rate of return of 10% and is considering investing in a project that requires an investment of $99000 and is expected to generate cash inflows of $42000 at the end of each year for three years. The present value of future cash inflows for this project is
A) $99000.
B) $104454.
C) $114898.
D) $5454.

Question

Quizplus · Accepted Answer

To calculate the present value of future cash inflows, we use the formula:

PV = CF/(1+r)^n

Where:
CF = cash flow
r = required rate of return
n = number of years

For year 1: PV = 42000/(1+0.1)^1 = 38181.82
For year 2: PV = 42000/(1+0.1)^2 = 34619.83
For year 3: PV = 42000/(1+0.1)^3 = 31472.58

Total PV = 38181.82 + 34619.83 + 31472.58 = 104454.23

Therefore, the present value of future cash inflows for this project is $104,454.23. The best choice is B.

Use the Following Table Present Value of an Annuity of 1\text { Present Value of an Annuity of } 1 Present Value of an Annuity of 1

Use the Following Table $\text { Present Value of an Annuity of } 1$