Final answer:
The present value of the cash flow stream, discounted at a rate of 10%, is $890.58. It is calculated by discounting each payment to its present value and then summing them up.
Step-by-step explanation:
To determine the present value of the given cash flow stream with different payments received at different times in the future, we need to discount each future payment back to the present at the given interest rate of 10%. The present value (PV) of each cash flow can be calculated using the formula PV = FV / (1 + r)^t, where FV is the future value, r is the rate, and t is the time in years until the payment is received.
Let's calculate the present value of each payment:
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- Year 1: PV = $300 / (1 + 0.10)^1 = $272.73
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- Year 2: PV = $500 / (1 + 0.10)^2 = $413.22
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- Year 3: PV = $0 / (1 + 0.10)^3 = $0.00
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- Year 4: PV = $300 / (1 + 0.10)^4 = $204.63
Finally, adding up all the present values for the different time periods gives us the final answer:
Total present value = $272.73 + $413.22 + $0.00 + $204.63 = $890.58