Bell Pty Ltd is considering a project that would provide a single cash inflow eight years from now of $80,000. What is the most that Bell would be willing to spend on this project if the discount rate is 16%?

Question

Quizplus · Accepted Answer

Using the formula for present value of a single cash flow:
PV = FV / (1+r)^n
where PV is the present value, FV is the future value, r is the discount rate, and n is the number of periods.

Substituting the values given:
PV = 80,000 / (1+0.16)^8
PV = 24,400

Therefore, the most Bell would be willing to spend on this project is $24,400. Thus, the correct answer is B.

Bell Pty Ltd Is Considering a Project That Would Provide