Question

8. Assume that you will receive $2,000 a year in Years 1 through 5, $3,000 a...

8. Assume that you will receive $2,000 a year in Years 1 through 5, $3,000 a year in Years 6 through 8, and $2,000 in Year 9, with all cash flows to be received at the end of the year. If you require a 14 percent rate of return, then what is the present value of these cash flows?

  1. $ 9,851.49

  2. $11,098.53

  3. $11,713.72

  4. $14,722.71

  5. $17,353.88

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Homework Answers

Answer #1

Net present value is calculated using a financial calculator by inputting the below:

  • 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 tenth cash flow cash flow, press the NPV button and enter the interest rate of 14%.
  • Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The present value of cash flows is $11,098.53.

Therefore, the answer is option b.


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