The present value of all future operating cash inflows is closest to:
A) $278,700.
B) $348,400.
C) $452,300.
D) $480,000.

Question

Quizplus · Accepted Answer

To calculate the present value of future operating cash inflows, we use the discounted cash flow (DCF) method. We first calculate the annual operating cash flows of $80,000 for three years and $120,000 for the fourth year, giving a total of $440,000. To account for the time value of money, we use a discount rate of 8%. Using a financial calculator or Excel, we can calculate the present value of these cash flows to be approximately $348,400. Therefore, the best choice is B.

The Present Value of All Future Operating Cash Inflows Is