Assignment: Chapter 04 Time Value of Money Attempts Average/6. 5. Present value To find the present value of a cash flow expected to be paid or received in the future, you will the future value cash flow by (1 + r)". What is the value today of a $12,000 cash flow expected to be received seventeen years from now based on an annual interest rate of 7%? $5,888 $37,906 $4,749 $3,799 Your broker called earlier today and offered you the opportunity to invest in a security. As a friend, she suggested that you compare the current, or present value, cost of the security and the discounted value of its expected future cash flows 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 current cost of the security is greater than the present value of the security's expected future cash flows. everything else being equal, you should invest if the present value of the security's expected future cash flows is less than the current cost of the security. Now that you've thought about the decision rule that should be applied to your decision, apply it to the following security offered by your broker: Tools ps