Question

Find the present values of the following cash flow streams at a 5% discount rate. Round your answers to the nearest cent.

0

1

2

3

4

5

Stream A	$0	$150	$350	$350	$350	$300
Stream B	$0	$300	$350	$350	$350	$150

Stream A $  

Stream B $  

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

Stream A $  

Stream B $  

Answer 1

Present Value at 5% Discount Rate :

Stream A = $ 1,285.66

Stream B= $ 1,310.99

Note :

Stream A = $ 150 * 1/(1.05)^ 1 + $ 350* 1/(1.05)^ 2 + $ 350 * 1/(1.05)^ 3 + $ 350* 1/(1.05)^ 4 + $ 300* 1/(1.05)^ 5

= $ 1,285.66

Stream B =

=$ 300 * 1/(1.05)^ 1 + $ 350* 1/(1.05)^ 2 + $ 350 * 1/(1.05)^ 3 + $ 350* 1/(1.05)^ 4 + $ 150* 1/(1.05)^ 5

= $ 1,310.99

Present Value at 0% Discount Rate :

Stream A = $ 1,500.00

Stream B= $ 1,500.00

Note :

Stream A = $ 150 * 1/(1.00)^ 1 + $ 350* 1/(1.00)^ 2 + $ 350 * 1/(1.00)^ 3 + $ 350* 1/(1.00)^ 4 + $ 300* 1/(1.00)^ 5

= $ 1,500.00

Stream B =

=$ 300 * 1/(1.00)^ 1 + $ 350* 1/(1.00)^ 2 + $ 350 * 1/(1.00)^ 3 + $ 350* 1/(1.00)^ 4 + $ 150* 1/(1.00)^ 5

= $ 1,500.00