Consider the Following Timeline Detailing a Stream of Cash Flows

question 40

Multiple Choice

Consider the following timeline detailing a stream of cash flows:
If the current market rate of interest is 8%,then the present value of this stream of cash flows is closest to:

• A) $22,871
• B) $21,211
• C) $24,074
• D) $26,000

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor.

Contribution Margin

The selling price per unit, minus the variable cost per unit, used to determine the profitability of products or services.

Fixed Costs

Business expenses that remain constant regardless of the level of goods or services produced.

Fixed Costs

Costs that do not change with the level of production or sales over a certain period, such as rent or salaries.