Final answer:
To calculate the present value of a cash flow stream, use the present value formula and discount each cash flow by the appropriate discount rate. In this case, the present value is calculated by discounting cash flows of -100, 200, 500, and 600 for periods 0, 1, 2, and 3, respectively, with a discount rate of 6%.
Step-by-step explanation:
To calculate the present value of a cash flow stream, we need to discount each cash flow by the appropriate discount rate and then sum them up. In this case, we have cash flows of -100, 200, 500, and 600 for periods 0, 1, 2, and 3, respectively, and a discount rate of 6%. The present value formula is: PV = CF0/(1+r)^0 + CF1/(1+r)^1 + CF2/(1+r)^2 + CF3/(1+r)^3, where CF0, CF1, CF2, and CF3 are the cash flows for each period and r is the discount rate. Substituting the values, we get: PV = -100/(1+0.06)^0 + 200/(1+0.06)^1 + 500/(1+0.06)^2 + 600/(1+0.06)^3. Calculating this gives us the present value of the cash flow stream.