Assume that you will receive R2,000 a year in Years 1 through 5, R3,000 a year in Years 6 through 8, and R4,000 in Year 9, with all cash flows to be received at the end of the year.If you require a 14 percent rate of return, what is the present value of these cash flows?

Question

Quizplus · Accepted Answer

Using a financial calculator, the present value of the cash flows can be calculated as follows:
PV = 2000/(1+0.14)^1 + 2000/(1+0.14)^2 + 2000/(1+0.14)^3 + 2000/(1+0.14)^4 + 2000/(1+0.14)^5 + 
     3000/(1+0.14)^6 + 3000/(1+0.14)^7 + 3000/(1+0.14)^8 + 4000/(1+0.14)^9
PV = R11,713.58
Therefore, the present value of the cash flows is R11,714. Option C is the correct answer.

Assume That You Will Receive R2,000 a Year in Years