Question

Find the present values of the following cash flow streams at an 8% discount rate. Do...

  1. Find the present values of the following cash flow streams at an 8% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent.
    0 1 2 3 4 5
    Stream A $0 $100 $400 $400 $400 $300
    Stream B $0 $300 $400 $400 $400 $100

    Stream A: $  

    Stream B: $  

  2. What are the PVs of the streams at a 0% discount rate? Round your answers to the nearest dollar.

    Stream A: $  

    Stream B: $  

Homework Answers

Answer #1

Answer a.

Discount Rate = 8.00%

Stream A:

Present Value = $100/1.08 + $400/1.08^2 + $400/1.08^3 + $400/1.08^4 + $300/1.08^5
Present Value = $1,251.25

Stream B:

Present Value = $300/1.08 + $400/1.08^2 + $400/1.08^3 + $400/1.08^4 + $100/1.08^5
Present Value = $1,300.32

Answer b.

Discount Rate = 0.00%

Stream A:

Present Value = $100 + $400 + $400 + $400 + $300
Present Value = $1,600.00

Stream B:

Present Value = $300 + $400 + $400 + $400 + $100
Present Value = $1,600.00

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