What is the present value of the following cash flow stream at a rate of 12.0%?
A)$9,699
B)$10,210
C)$10,747
D)$11,284
E)$11,849

Question

What is the present value of the following cash flow stream at a rate of 12.0%? 
A)$9,699 
B)$10,210 
C)$10,747 
D)$11,284 
E)$11,849

Quizplus · Accepted Answer

Using the present value formula:

PV = CF1/(1+r)^1 + CF2/(1+r)^2 + ... + CFn/(1+r)^n

PV = 2,800/(1+0.12)^1 + 3,400/(1+0.12)^2 + 4,500/(1+0.12)^3 + 6,100/(1+0.12)^4

PV = $2,500 + $2,417.36 + $2,395.89 + $2,533.78

PV = $10,747.03

Therefore, the present value of the cash flow stream is $10,747.03, which is closest to option C, $10,747.

What Is the Present Value of the Following Cash Flow