Consider the Following Timeline: If the Current Market Rate

question 59

Multiple Choice

Consider the following timeline: If the current market rate of interest is 13%, then the value of the cash flows in year 0 and year 2 as of year 1 is closest to ________.

• A) $167.35
• B) -$98.7
• C) $98.7
• D) -$70

---

Definitions:

Cash Payback Period

The length of time it takes for an investment to generate enough cash flow to recoup the original investment.

Annual Net Cash Flows

The net amount of cash that is received or expended by a business during a year, after all cash inflows and outflows are accounted for.

Expected Total Cash Flows

The anticipated sum of all cash inflows and outflows associated with an investment over a specific period.

Salvage Value

The estimated residual value of an asset at the end of its useful life, reflecting what it could be sold for or scrapped.