O Click here to read the eBook Uneven Cash Flows UNEVEN CASH

O Click here to read the eBook: Uneven Cash Flows UNEVEN CASH FLOW STREAM a. Find the present values of the following cash flow streams at a 4% discount rate. Round your answers to the nearest cent. 0 1 2 4 5 Stream A$0$100 $350 $350 $350 $300 Stream B$0 $300 $350 $350 $350 $100 Stream A Stream B$ 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 4%:

Stream A:

Present value=100/1.04+350/1.04^2+350/1.04^3+350/1.04^4+300/1.04^5

=$1276.66(Approx)

Stream B:

Present value=300/1.04+350/1.04^2+350/1.04^3+350/1.04^4+100/1.04^5

=$1304.58(Approx).

At 0%:

Stream A:

Present value=100+350+350+350+300

=$1450

Stream B:

Present value=300+350+350+350+100

=$1450