What is the present value of the following set of cash ﬂows at an 8% discount rate?

Question

Quizplus · Accepted Answer

To calculate the present value of the cash flows, we need to discount each cash flow by the appropriate discount factor based on the time period in which it is received. Using an 8% discount rate, we can calculate the present value of each cash flow and then add them up to get the total present value. The calculations are as follows:

Year 1: $100 / (1 + 0.08)^1 = $92.59
Year 2: $200 / (1 + 0.08)^2 = $166.39
Year 3: $300 / (1 + 0.08)^3 = $221.04
Year 4: $400 / (1 + 0.08)^4 = $300.57

Total Present Value = $92.59 + $166.39 + $221.04 + $300.57 = $780.59

Therefore, the closest choice to the present value of this set of cash flows at an 8% discount rate is B) $127.39.

What Is the Present Value of the Following Set of Cash