You are considering a project with the following cash flows:
Year 1 Year 2 Year 3
$4,200 $5,000 $5,400
What is the present value of these cash flows,given a 3% discount rate?

Question

Quizplus · Accepted Answer

To calculate the present value of the cash flows, we use the formula PV = CF1/(1+r)^1 + CF2/(1+r)^2 + CF3/(1+r)^3, where PV is the present value, CF1 is the cash flow in year 1, CF2 is the cash flow in year 2, CF3 is the cash flow in year 3, and r is the discount rate. Plugging in the given values, we get PV = 4200/(1+0.03)^1 + 5000/(1+0.03)^2 + 5400/(1+0.03)^3 = $13,732.41. Therefore, the best choice is A.

You Are Considering a Project with the Following Cash Flows