Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 8%,then the present value (PV)of this stream of cash flows is closest to:
A)$22,871
B)$21,211
C)$24,074
D)$26,000
E)$19,111

Question

Consider the following timeline detailing a stream of cash flows:  If the current market rate of interest is 8%,then the present value (PV)of this stream of cash flows is closest to:
A)$22,871 
B)$21,211 
C)$24,074 
D)$26,000 
E)$19,111

Quizplus · Accepted Answer

To find the present value of the cash flow stream we need to discount each cash flow to its present value and then sum them up. Using a financial calculator or Excel, we can calculate the present value to be $21,211, which is closest to choice (B).

Consider the Following Timeline Detailing a Stream of Cash Flows