The present value of $100 received at the end of year 1, $200 received at the end of year 2, and $300 received at the end of year 3, assuming an opportunity cost of 13 percent, is ________.
A) $ 453
B) $ 416
C) $1,181
D) $ 500

Question

Quizplus · Accepted Answer

The present value of $100 received at the end of year 1 is $100 / (1 + 0.13) = $88.49. The present value of $200 received at the end of year 2 is $200 / (1 + 0.13)^2 = $162.29. The present value of $300 received at the end of year 3 is $300 / (1 + 0.13)^3 = $205.22. The present value of all three cash flows is $88.49 + $162.29 + $205.22 = $456.

The Present Value of $100 Received at the End of Year