At the end of the next four years,a new machine is expected to generate net cash flows of $8,000,$12,000,$10,000,and $15,000,respectively.What are the cash flows worth today if a 3% interest rate properly reflects the time value of money in this situation?

Question

Quizplus · Accepted Answer

The present value of future cash flows is calculated using the formula PV = CF / (1 + r)^n for each year, where CF is the cash flow, r is the interest rate, and n is the year. Summing these present values gives $41,557.

At the End of the Next Four Years,a New Machine