Calculate the present value of the following cash flows assuming they occur at the end of each year and the interest rate is 12% p.a.:
Year 0,($12 000);Year 1,$5670;Year 2,$11 250.
A)$2030.93
B)$26 030.93
C)$28 920
D)($1163.19)

Question

Quizplus · Accepted Answer

The present value (PV) of future cash flows is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of periods. For Year 1: PV = $5670 / (1 + 0.12)^1 = $5062.50. For Year 2: PV = $11250 / (1 + 0.12)^2 = $8988.43. The total present value of the cash flows is the sum of these, minus the initial outlay: Total PV = -$12000 + $5062.50 + $8988.43 = $2030.93.

Calculate the Present Value of the Following Cash Flows Assuming