The present value of $1,000 received at the end of year 1, $1,200 received at the end of year 2, and $1,300 received at the end of year 3, assuming an opportunity cost of 7 percent, is
A)$2,500.
B)$3,043.
C)$6,516.
D)$2,856.

Question

Quizplus · Accepted Answer

Using the present value formula, we have:

PV = 1000/(1+0.07)^1 + 1200/(1+0.07)^2 + 1300/(1+0.07)^3

PV = 935.98 + 1051.16 + 1055.86

PV = 3043.00 (rounded to the nearest cent)

Therefore, the present value of the cash flows is $3,043.

The Present Value of $1,000 Received at the End of Year