What is the present value of a $150,000 cash flow to be received at the end of each of the next 20 years from an account that earns an annual rate of 9%?
A)$3,000,000
B)$7,674,018
C)$1,369,282
D)$2,324,169

Question

Quizplus · Accepted Answer

To calculate the present value of the cash flows, we need to use the formula PV = CF/(1+r)^n, where PV is the present value, CF is the cash flow, r is the annual interest rate, and n is the number of periods. Plugging in the values, we get:

PV = $150,000/(1+0.09)^1 + $150,000/(1+0.09)^2 + ... + $150,000/(1+0.09)^20
PV = $1,369,282. Therefore, the present value of the cash flows is $1,369,282. Therefore, the best choice is C.

What Is the Present Value of a $150,000 Cash Flow