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Which of the following is true about finding the present value of cash flows? Finding present value tells you what a cash flow will be worth in future years. Finding the present value of cash flows is important for financial theory, but it does not have much relevance to actual business decision making. Finding the present vilue of cash flows in future years tells you how much you would need to invest today so that it would grow to equal the given future amount. What is the value today of a $158,000 cash now expected to be received 12 years from now based on an annual interest rate of 7% ? $87,693 $108,739 $70,154 $355,846 Your broker calied earlier today and offered you the opportunify to invest in a security. As a friend, he suggested that you compare the current, or present value, cost of the securty and the discounted value of its expected future cash fows before deciding whather or not to invest. The decision rule that shoula be used to decide whether or not to invest should be: Everything else being equal, you shoula invest if the discounted value of the securitys expected future cash fows is oreater than or equal to the current cost of the securty. Everything ntse being equal, you should inveit if the present value of the socuritys expected future cash flows is tess than the current cost of the socunty, Your broker called earlier today and offered you the opportunity to invest in a secunty. As a friend, he suggested that you compare the current, or present value, cost of the security and the discounted value of its expected future cash hows before deciding whether or not to invest. The decision rule that should be used to decide whether or not to invest should be: Everything else being equal, you should invest if the discounted value of the security's expected future cash flows is greater than or equal to the current cost of the security, Everything else being equal, you should invest if the present value of the security's expected future cash fows is fess than the current cost of the security. Everything else being equal, you should invest if the current cost of the secunty is greater than the present value of the secunty's expected future cash flows. Now that you've thought about the decision rule that should be applied fo your decision, apply it to the following security offered by your broker: Jing Associates, LLC, a Large Iaw firm in Denver, is building a new office complex. To pay for the construction, Jing Associates is seiling a secunty that wifi pay the investor the lump sum of $38,600 in nine years. The current market price of the security is sl6, 429 . Assuming that you can earn an annual. feturn of 8.25s on your next most attractive investment, how much is the secunty worth to you foday? 519,8 118,912 431,205 Jing Associates, LLC, a large law firm in Denver, is building a new office complex. To pay for the construction, Jing Associates is selling a security that will pay the investor the lump sum of $38,600 in nine years. The current market price of the security is $16,429. Assuming that you can earn an annual return of 8.25% on your next most attractive investment, how much is the security worth to you today? $19,858$18,912$31,205 From strictly a financial perspective, should you invest in the jing security? Why or why not? Bocause the cost of the secunty is greater than the discounted value of the secunty's future cash flows. Because the oncounted value of the securitys future cash nows is greater than the cost of the securty

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