David Stephens has made an investment that will pay him $11,455, $16,376, and $19,812 at the end of the next three years. His investment was to offer a return of 14 percent. What is the present value of these cash flows? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To calculate the present value of the cash flows, we can use the formula: PV = CF / (1 + r)^n, where PV is the present value, CF is the cash flow, r is the discount rate (14%), and n is the number of periods. 
Using this formula for each cash flow: 
PV1 = 11,455 / (1 + 0.14)^1 = 10,043 
PV2 = 16,376 / (1 + 0.14)^2 = 12,620 
PV3 = 19,812 / (1 + 0.14)^3 = 13,359 
Adding up the three present values, we get: 
PV = 10,043 + 12,620 + 13,359 = 36,022 
Therefore, the best choice is B.

David Stephens Has Made an Investment That Will Pay Him