The present value of the project's annual cash flows is ________.

Question

Quizplus · Accepted Answer

To calculate the present value of the project's annual cash flows, we need to use the formula for present value of an annuity. Applying the formula:

PV = C × [(1 - (1+r)^-n)/r]

where PV is the present value, C is the annual cash flow, r is the discount rate, and n is the number of years.

Using a discount rate of 9% and the annual cash flows in the table, we get:

PV = 14,700 × [(1 - (1+0.09)^-4)/0.09] + 19,500 × [(1 - (1+0.09)^-5)/0.09] + 17,450 × [(1 - (1+0.09)^-6)/0.09]

PV = 51,635

Therefore, the present value of the project's annual cash flows is $51,635. The best choice is option C.

The Present Value of the Project's Annual Cash Flows Is