Answered: The present value of the following cash…

The present value of the following cash flow stream is $7,300 when discounted at 8 percent annually. What is the value of the missing cash flow? Year Cash Flow 1 $1,500 2 ? 3 2,700 4 2,900

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 1MC

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

100%

The present value of the following cash flow stream is
$7,300 when discounted at 8 percent annually. What is the value of the missing cash
flow?

Year Cash Flow
1 $1,500
2 ?
3 2,700
4 2,900

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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