A publisher is deciding whether or not to invest in a new printer.The printer would cost $500,and it would increase cash flows by $600 for the next two years.What is the present value of the cash flows from the investment?
A)$1100
B)$541
C)$600
D)$1041

Question

​A publisher is deciding whether or not to invest in a new printer.The printer would cost $500,and it would increase cash flows by $600 for the next two years.What is the present value of the cash flows from the investment?
A)​$1100
B)$541
C)$600
D)​$1041

Quizplus · Accepted Answer

The present value of the cash flows is $1100. This is calculated by taking the sum of the present values of the cash flows for each year. The present value of the cash flow for the first year is $600 / (1 + r), where r is the discount rate. The present value of the cash flow for the second year is $600 / (1 + r)^2. The discount rate is not given in the question, so we cannot calculate the exact present value. However, we can say that the present value of the cash flows will be greater than $500, which is the cost of the printer. This means that the investment in the new printer is a good one.

​A Publisher Is Deciding Whether or Not to Invest in a New

A Publisher Is Deciding Whether or Not to Invest in a New