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

   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

Present value = Future Value / (1 + R)^T

Present value of following cash flow streams @ 8% is

Stream A.

[$150 * (1.08)¹] + [$350 * (1.08)²] + [$350 * (1.08)³] + [$350 * (1.08)⁴] + [$300 * (1.08)⁵]

= $1,178.23

Stream B.

[$300 * (1.08)¹] + [$350 * (1.08)²] + [$350 * (1.08)³] + [$350 * (1.08)⁴] + [$150 * (1.08)⁵]

= $1,215.04

Present value of following cash flow streams @ 0% is

Stream A.

[$150 * (1.00)¹] + [$350 * (1.00)²] + [$350 * (1.00)³] + [$350 * (1.00)⁴] + [$300 * (1.00)⁵]

= $1,500

Stream B.

[$300 * (1.00)¹] + [$350 * (1.00)²] + [$350 * (1.00)³] + [$350 * (1.00)⁴] + [$150 * (1.00)⁵]

= $1,500