What is the net present value of the following cash flows if the relevant discount rate is 7 percent? $$\begin{array} { | r | r | }
\hline \text { Year } & \text { Cash Flow } \
\hline 0 & - \$ 11,520 \
\hline 1 & 81 \
\hline 2 & 650 \
\hline 3 & 880 \
\hline 4 & 2,300 \
\hline 5 & 15,800 \
\hline
\end{array}$$
A)$2,861.62
B)$2,311.92
C)$2,900.15
D)$3,248.87
E)$3,545.60

Question

What is the net present value of the following cash flows if the relevant discount rate is 7 percent? $$\begin{array} { | r | r | } 
\hline \text { Year } & \text { Cash Flow } \
\hline 0 & - \$ 11,520 \
\hline 1 & 81 \
\hline 2 & 650 \
\hline 3 & 880 \
\hline 4 & 2,300 \
\hline 5 & 15,800 \
\hline
\end{array}$$
A)$2,861.62
B)$2,311.92
C)$2,900.15
D)$3,248.87
E)$3,545.60

Quizplus · Accepted Answer

The correct answer is A because the net present value of the cash flows is $2,861.62. This is calculated by taking the present value of each cash flow and then summing them up. The present value of a cash flow is calculated by dividing the cash flow by (1 + r)^n, where r is the discount rate and n is the number of years from now that the cash flow will occur.

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