Find the present values of the following cash flow streams. The
appropriate interest rate is 12%....
Free
70.2K
Verified Solution
Link Copied!
Question
Finance
Find the present values of the following cash flow streams. Theappropriate interest rate is 12%. (Hint: It is fairly easyto work this problem dealing with the individual cash flows.However, if you have a financial calculator, read the section ofthe manual that describes how to enter cash flows such as the onesin this problem. This will take a little time, but the investmentwill pay huge dividends throughout the course. Note that, whenworking with the calculator's cash flow register, you must enterCF0 = 0. Note also that it is quite easy to work theproblem with Excel, using procedures described in theCh04 Tool Kit.xlsx.) Do not roundintermediate calculations. Round your answers to the nearestcent.
Year
Cash Stream A
Cash Stream B
1
$100
$300
2
400
400
3
400
400
4
400
400
5
300
100
Stream A: $
Stream B: $
What is the value of each cash flow stream at a 0% interestrate? Round your answers to the nearest dollar.
Stream A $
Stream B $
Answer & Explanation
Solved by verified expert
3.9 Ratings (528 Votes)
Stream A
Year
Cash
flows
Discount
factor
Present
value
1
100
0.892857143
89.29
2
400
0.797193878
318.88
3
400
0.711780248
284.71
4
400
0.635518078
254.21
5
300
0.567426856
170.23
PV
1,117.31
Stream
B
Year
Cash
flows
Discount
factor
Present
value
1
300
0.892857143
267.86
2
400
0.797193878
318.88
3
400
0.711780248
284.71
4
400
0.635518078
254.21
5
100
0.567426856
56.74
PV
1,182.40
The
present value at 0% interest rate will be equal to the sum of cash
flows
Stream A
= 100+400+400+400+300 = $1600
Stream B
= $1600
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
