You Expect to Receive $800 at the End of Each

question 76

Multiple Choice

You expect to receive $800 at the end of each of the next twenty years.What is the present value of the stream of payments if the interest rate is 12%?

• A) $5,975.55
• B) $5,892.62
• C) $6,049.60
• D) $6,054.63
• E) $5,619.80

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Definitions:

Cash Inflows

Money or funds entering a business from various sources like sales, investments, or financing.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of shareholder wealth maximization, such as purchasing equipment or acquiring another business.

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for the time value of money.

Payback Method

A capital budgeting technique that calculates the time required to recoup the cost of an investment, focusing on cash flows rather than profitability.