In order to receive $12,000 at the end of three years and $10,000 at the end of five years,how much must be invested now if you can earn 14% rate of return? (Ignore income taxes in this problem.)(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount.)
A) $8,100.
B) $12,978.
C) $13,293.
D) $32,054.

Question

Quizplus · Accepted Answer

To solve this problem, we need to find the present value (PV) of the two future cash flows using the given rate of return.

PV of $12,000 after 3 years:
PV = $12,000 / (1 + 0.14)^3 = $8,099.78 (rounded to 5 decimal places)

PV of $10,000 after 5 years:
PV = $10,000 / (1 + 0.14)^5 = $5,192.66 (rounded to 5 decimal places)

Total PV required today:
Total PV = PV of $12,000 + PV of $10,000 = $8,099.78 + $5,192.66 = $13,292.44

Therefore, the answer is C, $13,293, which is the closest whole dollar amount to the calculated total PV.

In Order to Receive $12,000 at the End of Three