Ronald Slump purchased a real estate investment with the following end-of-year cash flows: Year EOY Cash Flow
1 $200
2 $-350
3 $-430
4 $950
What is the present value of these cash flows if the appropriate discount rate is 20%?

Question

Quizplus · Accepted Answer

To calculate the present value of the cash flows, we need to discount each cash flow by the appropriate discount rate. Using a financial calculator or Excel, we can calculate the present value of these cash flows as follows:

PV = $200/(1+0.20)^1 - $350/(1+0.20)^2 - $430/(1+0.20)^3 + $950/(1+0.20)^4
PV = $133.33

Therefore, the present value of these cash flows is $133.33, which is closest to choice C ($133).

Ronald Slump Purchased a Real Estate Investment with the Following