Question

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: $  

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