Question

Calvin’s annual cash inflows are expected to be $32,000 for the next 8 years. Assuming a discount rate of 10%, the present value of cash flows for Calvin is A : $170,718. B : $14,928. C : $214,723. D : $16,421.

Answer 1

A : $170,718

Step-by-step explanation:

The computation of the present value of cash flows is shown below:

= Yearly cash inflows × PVIFA at 10% for 8 years

= $32,000 × 5.334926

= $170,718

Please refer to the PVIFA table. Since the cash flows are the same for the 8 years so we directly multiply the PVIFA with the yearly cash flows so the accurate amount can come.