A company has just sold a product with the following payment plan:

$75,000 today, $50,000 at the end of year 1, and $25,000 at the end of year two. If the payments are deposited into an account earning 4.5% per year, calculate the present value for the cash flow.

Question

A company has just sold a product with the following payment plan:

$75,000 today, $50,000 at the end of year 1, and $25,000 at the end of year two. If the payments are deposited into an account earning 4.5% per year, calculate the present value for the cash flow.

Quizplus · Accepted Answer

The correct answer is A because the present value of the cash flow is $145,740. This is calculated by taking the sum of the present values of each payment, which are $75,000, $47,619, and $23,121, respectively.

A Company Has Just Sold a Product with the Following