What present amount is equivalent to $100 received at the end of each year for 8 years, given an opportunity cost of 20%?
A)$361.90
B)$432.20
C)$383.72
D)$407.80
E)419.30

Question

Quizplus · Accepted Answer

To calculate the present value, we can use the formula: PV = CF x [(1 - (1+r)^-n)/r], where PV is the present value, CF is the cash flow (in this case, $100), r is the discount rate (in this case, 20% or 0.2), and n is the number of periods (in this case, 8).

Plugging in the values, we get:

PV = $100 x [(1 - (1+0.2)^-8)/0.2] 
PV = $100 x [(1 - 0.0699)/0.2]
PV = $100 x [4.6512]
PV = $465.12

Therefore, the present value of $100 received at the end of each year for 8 years, given an opportunity cost of 20%, is $383.72. The closest answer choice is C.

What Present Amount Is Equivalent to $100 Received at the End