17 of 19 O complete This Test 19 pts possible Question Help

17 of 19 (O complete) This Test: 19 pts possible Question Help * This Question: 1 pt In the following case, the mixed end-of-period cash flow stream has an annuity embedded within it. Calculate the present value of the cash flow stream, assuming a 8% discount rate Cash Flow $4,000 $7,000 $2,000 $2,000 $2,000 $2,000 $8,000 Year 2 Present Value ($)- What is the present value of this stream of cash flows? S[] (Round to the nearest cent.)

Solution

Year Cash flow ($) PV factor at 8% Discounted cash flow ($)                         1.00                  4,000.00     0.9259     3,703.70                         2.00                  7,000.00     0.8573     6,001.37                         3.00                  2,000.00     0.7938     1,587.66                         4.00                  2,000.00     0.7350     1,470.06                         5.00                  2,000.00     0.6806     1,361.17                         6.00                  2,000.00     0.6302     1,260.34                         7.00                  8,000.00     0.5835     4,667.92 Present Value ($ ) 20,052.23 $ Total value 25,333.00 Less: Down Payment (4,335.00) Loan Amount 20,998.00 Monthly interest = 3.5%/12 = 0.29% Total period of loan = 2 years x 12 months = 24 period Annuity factor at 0.29% per period for 24 period = 23.1514 Monthly payment = $ 20,998 / 23.1514 = $ 906.99