Capstone Investments is considering a project that will produce cash inflows of $11,000 at the end of Year 1, $24,000 in Year 2,

Question

3 years ago

12

Capstone Investments is considering a project that will produce cash inflows of $11,000 at the end of Year 1, $24,000 in Year 2,

and $36,000 in Year 3. What is the present value of these cash inflows at a discount rate of 12 percent?
a.$41,997.60

b.$46,564.28

c.$54,578.17

d.$54,868.15

e.$63,494.54

Business

1 answer:

kherson [118] · Answer 1 · 2022-05-20T23:41:16+03:00

Answer:

The correct answer is C.

Explanation:

Giving the following information:

Cash inflows:

Year 1= $11,000

Year 2= $24,000

Year 3= $36,000

To calculate the present value, we need to use the following formula:

FV= PV*(1+i)^n

Isolating PV:

PV= FV/(1+i)^n

Year 1= 11,000/(1.12)= $9,821.43

Year 2= 24,000/(1.12^2)= $19,132.65

Year 3= 36,000/(1.12^3)= $25,624.09

Total= $54,578.17