Question

Question 13 (6 points) **The Present Value (value in year 0) of MT Company's cash flows listed below at a compound interest rate of 14% per year is: Year 0 1 2 3 4 5 6 Cash Flow ($) 0 0 0 +500 +500 +500 +500 Comments: Before starting calculations, make sure you can see all the cash flows in the table from year 0 to 6. All the answers listed were calculated based on compound interest factor tables. $1,321 $2,461 $1,457 $1,121

Please answer these 3 questions.

Answer 1

Solution to question 13:

Option d: $1,121

Workings:

Year	Cash flow	Present value factor at 14%	Present value
0	0	1	0
1	0	1/1.14 = 0.87719	0
2	0	1/(1.14^2) = 0.76947	0
3	500	1/(1.14^3) = 0.67497	337.485
4	500	1/(1.14^4) = 0.59208	296.04
5	500	1/(1.14^5) = 0.51937	259.685
6	500	1/(1.14^6) = 0.45559	227.795
TOTAL			$ 1,121