1. The present value of a cash flow stream is $11,958.20. Using a discount rate of 12% what would be the missing cash flow in year 2?

Year Cash Flow
1 $2,000
2 ???
3 $4,000
4 $4,000

a. $4000 b. $4500 c. $5000 d. $5500 e. $6000

6000

6000

To find the missing cash flow in year 2, we can use the present value formula:

Present Value = Cash Flow / (1 + Discount Rate)^(Number of Years)

Given that the present value is $11,958.20 and the discount rate is 12%, we can set up the equation:

$11,958.20 = $2,000 / (1 + 0.12)^1 + ??? / (1 + 0.12)^2 + $4,000 / (1 + 0.12)^3 + $4,000 / (1 + 0.12)^4

Simplifying the equation:

$11,958.20 = $2,000 / (1.12) + ??? / (1.12)^2 + $4,000 / (1.12)^3 + $4,000 / (1.12)^4

$11,958.20 = $1,785.71 + ??? / 1.254 + $2,851.32 + $3,482.24

Subtracting the known cash flows:

$2,839.93 = ???

Therefore, the missing cash flow in year 2 would be $2,839.93.

To find the missing cash flow in year 2, we can use the present value formula with the given information.

The present value (PV) formula is:
PV = CF / (1 + r)^n

Where:
PV = Present Value
CF = Cash flow
r = Discount rate
n = Number of periods

We are given the present value of the cash flow stream as $11,958.20 and a discount rate of 12%. We need to find the missing cash flow in year 2.

Let's substitute the values into the formula to solve for the missing cash flow in year 2:

$11,958.20 = CF2 / (1 + 0.12)^2

To solve for CF2, we need to rearrange the formula:

CF2 = $11,958.20 * (1 + 0.12)^2

Now, we can calculate the missing cash flow:

CF2 = $11,958.20 * (1.12)^2
CF2 = $11,958.20 * 1.2544
CF2 ≈ $14,932.63

Therefore, the missing cash flow in year 2 is approximately $14,932.63.

Unfortunately, this value does not match any of the options given (a, b, c, d, e). It is possible that there may be an error in the question or answer choices.