The NPV (net present value)of a cash stream that is equal to $75 per period for 5 periods with a rate of return of 15% per period would be
A)$251.41.
B)$289.12.
C)$312.74.
D)$322.44.

Question

Quizplus · Accepted Answer

The NPV of a cash stream is the sum of the present values of all the cash flows. The present value of a cash flow is the amount of money that would have to be invested today at a given rate of return to equal the cash flow in the future. The formula for the present value of a cash flow is:PV = CF / (1 + r)^nwhere:PV is the present valueCF is the cash flowr is the rate of returnn is the number of periodsIn this case, the cash flow is $75, the rate of return is 15%, and the number of periods is 5. So, the present value of each cash flow is:PV = $75 / (1 + 0.15)^5 = $42.19The NPV is the sum of the present values of all the cash flows, so:NPV = $42.19 + $42.19 + $42.19 + $42.19 + $42.19 = $210.95Therefore, the NPV of the cash stream is $210.95.

The NPV (Net Present Value)of a Cash Stream That Is