Question

UNEVEN CASH FLOW STREAM

Find the present values of the following cash flow streams at an 8% discount rate. Round your answers to the nearest cent.
0 1 2 3 4 5
Stream A $0 $100 $400 $400 $400 $300
Stream B $0 $300 $400 $400 $400 $100
Stream A $
Stream B $
What are the PVs of the streams at 0%, compounded annually?Stream A $ Stream B $

Answer 1

Present Value

Stream A $1,251.247

Stream B $1,300.316

Step-by-step explanation:

The present value of a future sum is the amount that would be invested today at the prevailing interest rate to have the sum

Stream A

(100 × 1.08^9-1) + (400× 1.08^-2) + (400× 1.08^-3) + (400× 1.08^-4) + (300× 1.08^-5) = $1,251.247

Stream B

(300 × 1.08^9-1) + (400× 1.08^-2) + (400× 1.08^-3) + (400× 1.08^-4) + (100× 1.08^-5) = $1,300.316

Present Value

Stream A $1,251.247

Stream B $1,300.316