What is the present value of the following mixed cash flow stream if interest is 6% (rounded)? $$\begin{array} { | l | l | }
\hline \text { YEAR } & \text { CASH FLOW } \
\hline 1 & \$ 5,000 \
\hline 2 & \$ 8,000 \
\hline 3 & \$ 9,500 \
\hline
\end{array}$$
A) $25,370
B) $19,813
C) $21,225
D) $18,750

Question

What is the present value of the following mixed cash flow stream if interest is 6% (rounded)? $$\begin{array} { | l | l | } 
\hline \text { YEAR } & \text { CASH FLOW } \
\hline 1 & \$ 5,000 \
\hline 2 & \$ 8,000 \
\hline 3 & \$ 9,500 \
\hline
\end{array}$$
A) $25,370
B) $19,813
C) $21,225
D) $18,750

Quizplus · Accepted Answer

To find the present value of the mixed cash flow stream, we discount each cash flow back to the present value using the formula $\text{PV} = \frac{\text{FV}}{(1 + r)^n}$, where PV is the present value, FV is the future value (cash flow), r is the interest rate, and n is the number of periods. For Year 1: $\text{PV} = \frac{5000}{(1 + 0.06)^1} = \frac{5000}{1.06} = \$4716.98$For Year 2: $\text{PV} = \frac{8000}{(1 + 0.06)^2} = \frac{8000}{1.1236} = \$7121.57$For Year 3: $\text{PV} = \frac{9500}{(1 + 0.06)^3} = \frac{9500}{1.191016} = \$7974.45$Adding these together: \$4716.98 + \$7121.57 + \$7974.45 = \$19813Therefore, the present value of the cash flow stream, rounded, is \$19,813.

What Is the Present Value of the Following Mixed Cash