PV of Multiple Cash Flows: Ferris Ltd Has Borrowed from Their

question 30

Multiple Choice

PV of multiple cash flows: Ferris Ltd has borrowed from their bank at a rate of 8 per cent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows-$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)

• A) $2,735,200
• B) $2,615,432
• C) $2431,224
• D) $2,815,885

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Definitions:

Equilibrium

A state in which market supply and demand balance each other, and as a result, prices become stable.

Comparative Advantage

The ability of a country, individual, or firm to produce a particular good or service at a lower opportunity cost than others.

Marginal Cost

The cost incurred by producing one additional unit of a product or service.

Opportunities Forgone

The benefits, profit, or value of something that must be given up to acquire or achieve something else.