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What is the PV of cash flow stream of $2000 for 5 years 6% cost of...

What is the PV of cash flow stream of $2000 for 5 years 6% cost of capital? (please explain)

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Answer #1

Stream of cash flow is an annuity and present value of annuity is:

a Present value of annuity= P* [ [1- (1+r)-n ]/r ]
P= Periodic payment                            2,000
r= Rate of interest per period
Annual interest 6.00%
Number of interest payments per year 1
Interest rate per period 0.06/1=
Interest rate per period 6.000%
n= number of periods:
Number of years 5
Periods per year 1
number of periods 5
Present value of annuity= 2000* [ (1- (1+0.06)^-5)/0.06 ]
Present value of annuity= 8,424.73
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