Question

An investment is expected to produce annual cash flows $8,000
every year for 5 years. Assuming a discount rate of 8%, the present
value of this series of cash flows is _____. (Round your answer to
two decimal places.)

Period | 1 | 2 | 3 | 4 | 5 |

8% | 0.92593 | 0.85734 | 0.79383 | 0.73503 | 0.68058 |

a.$31,941.68

b.$39,852.23

c.$32,857.53

d.$29,866.67

Answer #1

Correct answer-----------a.$31,941.68

Working

Year | Cash flows (A) | PV factor @ 8% (B) | Present value (A x B) |

1 | $ 8,000.00 | 0.92593 | $ 7,407.44 |

2 | $ 8,000.00 | 0.85734 | $ 6,858.72 |

3 | $ 8,000.00 | 0.79383 | $ 6,350.64 |

5 | $ 8,000.00 | 0.73503 | $ 5,880.24 |

4 | $ 8,000.00 | 0.68058 | $ 5,444.64 |

Present value of cash flows | $ 31,941.68 |

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