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    Present value of a series of cash flows

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    You are considering buying a contract that offers the following cash flows
    Year 0=$100 1=$100 2=$200 3=$300 4=$400 5=$400 6=$400

    If your required rate of return is 12% for cash flows received between year 0 through year 2 and 6% thereafter, what is the maximum you should pay for the contract?
    possible answers
    a)1341.20 b)1378.46 c)1981.20 d)1320.54
    e)1522.54 f)1230.54 g)2600 h)1700
    i)1100 j)1400.

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    Solution Summary

    The solution calculates the present value of a series of cash flows.