Consider the Following Timeline Detailing a Stream of Cash Flows

question 18

Multiple Choice

Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 8%, then the future value (FV) of this stream of cash flows is closest to ________.

• A)$11,699
• B)$5850
• C)$14,039
• D)$18,718

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Definitions:

Economic Benefits

The gains derived from financial and non-financial activities, including income, improved well-being, or increased value.

Asset's Fair Value

The estimated price at which an asset could be bought or sold in a current transaction between willing parties, other than in a liquidation sale.

Double Diminishing-Balance

A method of accelerated depreciation which doubles the rate at which an asset's book value depreciates, leading to larger deductions in the early years of an asset's life.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.