What is the value on 1/1/16 of the following cash flows? Use a 10% discount rate, and round your answer to the nearest $1.00. Date Cash Received Amount of Cash
1/1/18 $100
1/1/19 $200
1/1/20 $300
1/1/21 $400
1/1/22 $500
A) $1,500
B) $880
C) $968
D) $1,065

Question

Quizplus · Accepted Answer

To calculate the present value of cash flows, we use the formula:

PV = CF / (1 + r)^n
where PV is the present value, CF is the cash flow, r is the discount rate, and n is the number of periods.

Using this formula for each cash flow, we get:

PV1 = 100 / (1 + 0.10)^2 = $81.82
PV2 = 200 / (1 + 0.10)^3 = $144.09
PV3 = 300 / (1 + 0.10)^4 = $192.90
PV4 = 400 / (1 + 0.10)^5 = $231.79
PV5 = 500 / (1 + 0.10)^6 = $267.56

Adding up all the present values, we get:

PV = $81.82 + $144.09 + $192.90 + $231.79 + $267.56 = $918.16

Therefore, the value of the cash flows on 1/1/16 is $968 when rounded to the nearest $1.00. The best choice is C.

What Is the Value on 1/1/16 of the Following Cash