BUISENESS MANAGEMENT
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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What is the present value of a stream of annual end-of-the-year annuity cash flows if the discount rate is 0%, and the cash flows of $50 last for 20 years?
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Less than $1, 000
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Exactly $1, 000
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More than $1, 000
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This question cannot be answered because we have an interest rate of 0.0%.
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Explanation:
Detailed explanation-1: -The present value of a cash flow (i.e. the value of future cash in today’s dollars) is calculated by multiplying the cash flow for each projected year by the discount factor, which is driven by the discount rate and the matching time period.
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