You are scheduled to receive a $750 cash flow in one year, a $1,000 cash flow in 2 years, and pay a $300 payment in 4 years. If interest rates are 6% per year, what is the combined present value of these cash flows?
A) $1,359.92
B) $1,413.92
C) $1,592.63
D) $1,613.02

Question

Quizplus · Accepted Answer

The present value of each cash flow is calculated using the formula PV = FV / (1 + r)^n. For $750 in one year: PV = 750 / (1.06)^1 = $707.55. For $1,000 in two years: PV = 1000 / (1.06)^2 = $890.00. For -$300 in four years: PV = -300 / (1.06)^4 = -$237.63. Adding these gives $707.55 + $890.00 - $237.63 = $1,359.92.

You Are Scheduled to Receive a $750 Cash Flow in One