Moving Cash Flows What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?
A)$478.11
B)$980.00
C)$1,024.87
D)$1,364.10

Question

Quizplus · Accepted Answer

To calculate the value of a cash flow in a different year, we need to use the formula:

PV = CF / (1 + i)n

where PV is the present value, CF is the cash flow, i is the interest rate, and n is the number of years.

In this case, we want to find the present value of a $700 cash flow made in year 3, in year 7, with an interest rate of 10%. So, we need to use the formula:

PV = $700 / (1 + 0.1)^(7-3)
PV = $700 / (1.1)^4
PV = $700 / 1.4641
PV = $477.95

Therefore, the value of the cash flow in year 7 is $477.95, which is closest to answer choice C) $1,024.87.

Moving Cash Flows What Is the Value in Year 7