Final answer:
To determine the present value of the investment, discount each cash flow to its present value and sum them up. At a 14% rate of return, the total present value of the cash flows—$100, $200, and $300 due in one, two, and three years respectively—is closest to $445.11.
Step-by-step explanation:
The question is asking to calculate the present value of a series of cash flows expected at different points in the future, using a given rate of return. To find the value of the investment today, we need to discount each future payment back to its present value using the formula for present value PV = FV / (1 + r)^n, where FV is the future value, r is the rate of return, and n is the number of periods.
- Year 1 cash flow: $100 / (1 + 0.14)^1 = $87.72
- Year 2 cash flow: $200 / (1 + 0.14)^2 = $153.94
- Year 3 cash flow: $300 / (1 + 0.14)^3 = $203.45
Adding these amounts together gives us the total present value of the investment: $87.72 + $153.94 + $203.45 = $445.11.
Therefore, the value of the investment today, given a 14% rate of return, is closest to $445.11.