What is the present value of the following cash flow stream at a rate of 12.0%?
A) $9,699
B) $10,210
C) $10,747
D) $11,284
E) $11,849

Question

What is the present value of the following cash flow stream at a rate of 12.0%? 
A) $9,699 
B) $10,210 
C) $10,747 
D) $11,284 
E) $11,849

Quizplus · Accepted Answer

To calculate the present value of the cash flow stream at a rate of 12.0%, we need to use the present value formula:

PV = CF1 / (1 + r)^1 + CF2 / (1 + r)^2 + CF3 / (1 + r)^3 + CF4 / (1 + r)^4 + CF5 / (1 + r)^5

Where PV is the present value, CF is the cash flow for each year, r is the discount rate (12.0%), and the subscript numbers represent the year.

Using the given cash flows, we get:

PV = 1,000 / (1 + 0.12)^1 + 2,000 / (1 + 0.12)^2 + 3,000 / (1 + 0.12)^3 + 4,000 / (1 + 0.12)^4 + 5,000 / (1 + 0.12)^5
PV = $10,747.10 (rounded to the nearest cent)

Therefore, the best choice is C) $10,747.

What Is the Present Value of the Following Cash Flow