Find the present values of the following cash flow streams a

Find the present values of the following cash flow streams at an 11% discount rate. Round your answers to the nearest cent.

Stream A $  

Stream B $  

What are the PVs of the streams at a 0% discount rate?

Stream A $  

Stream B $  

Solution

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

At 11%:

A:

Present value=150/1.11+450/1.11^2+450/1.11^3+450/1.11^4+300/1.11^5

=$1303.87(Approx).

B:

Present value=300/1.11+450/1.11^2+450/1.11^3+450/1.11^4+150/1.11^5

=$1349.98(Approx).

At 0%:

A:

Present value=150+450+450+450+300

=$1800

B:

Present value=300+450+450+450+150

=$1800