Question

You are scheduled to receive a $490 cash flow in one year, a $790 cash flow in two years, and pay a $390 payment in three years. If interest rates are 8 percent per year, what is the combined present value of these cash flows?

a. $890.00
b. $1,280.00
c. $1,440.60
d. $821.41

Answer 1

Answer:

The answer is c. $1,440.60

Explanation:

Present value = PV of cash flows

PV = $490(1.08^-1) +  $790( 1.08^-2) +  $390(1.08^-3)

PV = $1,440.5959 =  $1,440.60