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.
A)$1500
B)$880
C)$968
D)$1065

Question

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. 
A)$1500 
B)$880 
C)$968 
D)$1065

Quizplus · Accepted Answer

We need to calculate the present value of the cash flows using a 10% discount rate. 
PV = CF/(1+r)^n, where PV is present value, CF is cash flow, r is discount rate, and n is number of periods.

For cash flow 1: 
PV = 1000/(1+0.10)^1 = $909

For cash flow 2: 
PV = 800/(1+0.10)^2 = $661

For cash flow 3: 
PV = 2000/(1+0.10)^3 = $1504

For cash flow 4: 
PV = 500/(1+0.10)^4 = $383

Adding up the present values of the cash flows, we get: 
PV = $909 + $661 + $1504 + $383 = $3457

Therefore, the value on 1/1/16 of the given cash flows is $3457, which is closest to option C ($968) rounded to the nearest $1.00.

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