Question

# The appropriate discount rate for the following cash flows is 12 percent compounded quarterly. Year Cash...

 The appropriate discount rate for the following cash flows is 12 percent compounded quarterly.
 Year Cash Flow 1 \$800 2 700 3 0 4 1,400

Required:

 What is the present value of the cash flows?

Multiple Choice

• \$2,178.57

• \$2,093.13

• \$2,135.85

• \$2,162.05

• \$383.67

Net present value can be solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= \$0.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 12%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

Net present value at 12% discount rate is \$2,162.05.

Hence, the answer is option d.

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