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Lester's rented some equipment at a cost of $800 for Years 1 through 3 and $900 for Years 4 and 5. Which of these correctly depicts a portion of the present value of multiple annuities time line?

a. Year 1 has two cash flows in the amounts of $900 and $100.
b. Year 4 has two cash flows in the amounts of $800 and $100.
c. Year 1 has one cash flow in the amount of $800.
d. Year 3 has one cash flow in the amount of -$800.

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Answer:

d. Year 3 has one cash flow in the amount of -$800.

Explanation:

Timeline arranges an event in chronological order.

When there's a cash outflow- money is being paid for something - it is represented by a negative number.

When there's a cash inflow - money is being received- it is represented by a positive number.

Lester's rented an equipment. This means he would be paying someone for the equipment. So the cash flow should be represented with a negative number

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