What is the present value of the following cash flow stream if the interest rate is 6.0% per year: 0 at Time 0; $1,000 at the end of Year 1; and $2,000 at the end of Years 2,3,and 4?
A)$5,986.81
B)$6,286.16
C)$6,600.46
D)$6,930.4

Question

Quizplus · Accepted Answer

The present value of the cash flow stream is $5,986.81. This is calculated by taking the sum of the present values of each cash flow, which are:* $1,000 / (1 + 0.06)^1 = $943.39* $2,000 / (1 + 0.06)^2 = $1,833.02* $2,000 / (1 + 0.06)^3 = $1,729.63* $2,000 / (1 + 0.06)^4 = $1,620.77Total present value = $943.39 + $1,833.02 + $1,729.63 + $1,620.77 = $5,986.81

What Is the Present Value of the Following Cash Flow