What is the Present Value (PV)of the following series of cash flows using an 8% discount rate?
A)Less than $1200
B)$1201 - $1250
C)$1251 - $1300
D)$1301 - $1350
E)More than $1350

Question

What is the Present Value (PV)of the following series of cash flows using an 8% discount rate? 
A)Less than $1200 
B)$1201 - $1250 
C)$1251 - $1300 
D)$1301 - $1350 
E)More than $1350

Quizplus · Accepted Answer

To calculate the present value of a series of cash flows, we need to discount each cash flow to present value using the given discount rate. Then, we add up all the present values to get the total present value.

Year 1: $800 / (1+0.08)^1 = $740.74
Year 2: $900 / (1+0.08)^2 = $772.20
Year 3: $1000 / (1+0.08)^3 = $844.90
Year 4: $1100 / (1+0.08)^4 = $910.98
Year 5: $1200 / (1+0.08)^5 = $969.32

Total Present Value = $740.74 + $772.20 + $844.90 + $910.98 + $969.32 = $4238.14

Therefore, the present value of the cash flows is between $1251- $1300, making the answer C the best choice.

What Is the Present Value (PV)of the Following Series of Cash