Series 79 practice questionmediumDCF - Discounting Cash Flows
An analyst projects free cash flow of $100 million in one year. If the discount rate is 10%, what is the present value of this cash flow?
- A$100 million
- B$90 million
- C$91 million✓ Correct answer
- D$110 million
Explanation
Why C — $91 million
The present value = 100 / (1 + 0.10) = $90.91 million, which rounds to $91 million. The other options are common computational errors.
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