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

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