What is the present value of a $100,000 cash flow to be received at the end of each of the next 15 years from an account that earns an annual rate of 10%?
A)$1,500,000
B)$760,608
C)$523,450
D)$976,455

Question

Quizplus · Accepted Answer

The present value of a series of cash flows can be calculated using the formula:
PV = CF × [1 - (1 + r)-n] / r 
where CF is the cash flow amount, r is the annual discount rate, and n is the number of periods.

Applying this formula to the given problem, we get:
PV = $100,000 × [1 - (1 + 0.10)-15] / 0.10
= $100,000 × (7.60608)
= $760,608

Therefore, the present value of the cash flow is $760,608, so the best choice is B.

What Is the Present Value of a $100,000 Cash Flow