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27 April, 11:44

Capstone Investments is considering a project that will produce cash inflows of $11,000 at the end of Year 1, $24,000 in Year 2, and $36,000 in Year 3. What is the present value of these cash inflows at a discount rate of 12 percent?

a.$41,997.60

b.$46,564.28

c.$54,578.17

d.$54,868.15

e.$63,494.54

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  1. 27 April, 12:33
    0
    The correct answer is C.

    Explanation:

    Giving the following information:

    Cash inflows:

    Year 1 = $11,000

    Year 2 = $24,000

    Year 3 = $36,000

    To calculate the present value, we need to use the following formula:

    FV = PV * (1+i) ^n

    Isolating PV:

    PV = FV / (1+i) ^n

    Year 1 = 11,000 / (1.12) = $9,821.43

    Year 2 = 24,000 / (1.12^2) = $19,132.65

    Year 3 = 36,000 / (1.12^3) = $25,624.09

    Total = $54,578.17
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