Business, 22.09.2020 18:01, blondie02

A. Find the present values of the following cash flow streams. The appropriate interest rate is 9%. Year
Cash Stream A Cash Stream B
1 $100 $300
2 400 400
3 400 400
4 400 400
5 300 100

b. What is the value of each cash flow stream at a 0% interest rate?

Answers: 3

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Answers

answered: orose6395

PV - Stream A = $1215.638009 rounded off to $1215.64

PV - Stream B = $1269.13797 rounded off to $1269.14

PV - Stream A = $1600

PV - Stream B = $1600

Explanation:

The present value of a series or stream of cash flows can be calculated using the following formula,

PV of Cash flow = CF1 / (1+i) + CF2 / (1+i)^2 + ... + CFn / (1+i)^n

Where,

CF1, CF2, ... represents the cash flow in year 1, year 2 and so oni is the relevant discount rate or interest rate

PV - Stream A = 100 / (1+0.09) + 400 / (1+0.09)^2 + 400 / (1+0.09)^3 +

400 / (1+0.09)^4 + 300 / (1+0.09)^5

PV - Stream A = $1215.638009 rounded off to $1215.64

PV - Stream B = 300 / (1+0.09) + 400 / (1+0.09)^2 + 400 / (1+0.09)^3 +

400 / (1+0.09)^4 + 100 / (1+0.09)^5

PV - Stream B = $1269.13797 rounded off to $1269.14

When the interest rate is zero, the present value of cash flows remain the same as their absolute values. Thus, the PV of cash flow streams A and B at 0% interest rate is,

PV - Stream A = 100 + 400 + 400 + 400 + 300

PV - Stream A = $1600

PV - Stream B = 300 + 400 + 400 + 400 + 100

PV - Stream B = $1600

answered: Guest

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7. customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

your welcome leave a rate and a < 3

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A. Find the present values of the following cash flow streams. The appropriate interest rate is 9%....