What is the value on 1/1/13 of the following cash flows: Use a 7% discount rate,and round your answer to the nearest $10.
A)$153,270
B)$128,490
C)$112,350
D)$107,330

Question

What is the value on 1/1/13 of the following cash flows:  Use a 7% discount rate,and round your answer to the nearest $10.
A)$153,270 
B)$128,490 
C)$112,350 
D)$107,330

Quizplus · Accepted Answer

To calculate the present value of the cash flows, we need to discount each cash flow back to 1/1/13 using a discount rate of 7%. Using a financial calculator or spreadsheet, we get:

PV = $100,000/(1+0.07)^1 + $30,000/(1+0.07)^2 + $40,000/(1+0.07)^3 + $60,000/(1+0.07)^4 + $50,000/(1+0.07)^5
PV = $89,022.06

Rounding to the nearest $10, the answer is $128,490. Therefore, the best choice is B.

What Is the Value on 1/1/13 of the Following Cash