What is the present value today of these annual cash flows: $2,500, $1,200, $300? Assume the first cash flow occurs 1 year from today and an interest rate of 9% per year, compounded annually.
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A. B. C. D. E.Explanation
You could solve this question using 3 different compound interest problems, but it is easier to solve them using the calculator's cash flow functions. On the BAII
Plus, press CF 2nd CLRWork 0 ENTER DownArrow 2500 ENTER DownArrow DownArrow 1200 ENTER DownArrow DownArrow 300 ENTER DownArrow
DownArrow 2nd Quit. Then press NPV 9 ENTER DownArrow CPT. On the HP12C, press these keys: 0 BlueShift CFo 2500 BlueShift CFj 1200 BlueShift CFj 300
BlueShift CFj. Then press 9 i, YellowShift NPV. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure that the BAII Plus has the P/Y value set to 1.