Find the Present Value of an Income Stream Which Has

question 48

Multiple Choice

Find the present value of an income stream which has a negative flow of $100 per year for 3 years,a positive flow of $200 in the 4th year,and a positive flow of $300 per year in Years 5 through 8.The appropriate discount rate is 4 percent for each of the first 3 years and 5 percent for each of the later years.Thus,a cash flow accruing in Year 8 should be discounted at 5 percent for some years and 4 percent in other years.All payments occur at year-end.

• A) $528.21
• B) $1,329.00
• C) $792.49
• D) $1,046.41
• E) $875.18

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Definitions:

Cash Short And Over

An account that records discrepancies between actual cash received and the expected amount, either indicating missing funds (short) or excess funds (over).

Journal Entry

A journal entry is a record of a financial transaction in the accounting books, indicating the accounts and amounts to be debited and credited.

Outstanding Checks

Checks that have been written and recorded in the account ledger but not yet cleared or cashed by the bank.

EFT Deposit

An electronic funds transfer deposit, which represents the digital transfer of money into a bank account.