An investment will return net after-tax cash inflows of $8 000 per year for 6 years. The desired rate of return is 14%. What is the total present value of the future cash flows?

Question

Quizplus · Accepted Answer

The total present value of the future cash flows can be calculated using the formula for the present value of an annuity: PV = C * [(1 - (1 + r)^-n) / r], where C is the annual cash inflow ($8,000), r is the rate of return (14% or 0.14), and n is the number of years (6). Plugging in the values, PV = 8000 * [(1 - (1 + 0.14)^-6) / 0.14] = $31,109.60.

An Investment Will Return Net After-Tax Cash Inflows of $8