Question

​(Present

value of an uneven stream of

payments​)

You are given three investment alternatives to analyze. The cash flows from these three investments are as​ follows:

Investment
End of Year	A			B		C
1	​$	3,000		​$	1,000	​$	5,000
2		4,000			1,000		5,000
3		5,000			1,000		(5,000)
4		(6,000)			1,000		(5,000)
5		6,000			4,000		15,000

What is the present value of each of these three investments if the appropriate discount rate is

15

​percent?

a.  What is the present value of investment A at an annual discount rate of

15

​percent?

​$nothing  

​(Round to the nearest​ cent.)

Answer 1

- Calculating the Present value of each Investment cash flow stream:-  

Year	Cash Flow of Stream of A ($) (a)	Cash Flow of Stream of B ($) (b)	Cash Flow of Stream of C ($) (c)	PV Factor @15% (d)	Present Value of Cash Flow of Stream of A ($) [(a)*(d)]	Present Value of Cash Flow of Stream of B ($) [(b)*(d)]	Present Value of Cash Flow of Stream of C ($) [(c)*(d)]
1	3,000.00	1,000.00	5,000.00	0.86957	2,608.696	869.57	4,347.83
2	4,000.00	1,000.00	5,000.00	0.75614	3,024.575	756.14	3,780.72
3	5,000.00	1,000.00	(5,000.00)	0.65752	3,287.581	657.52	(3,287.58)
4	(6,000.00)	1,000.00	(5,000.00)	0.57175	(3,430.519)	571.75	(2,858.77)
5	6,000.00	4,000.00	15,000.00	0.49718	2,983.060	1,988.71	7,457.65
					8,473.39	4,843.69	9,439.85

a). The present value of investment A at an annual discount rate of 15% is $8,473.39

b). The present value of investment B at an annual discount rate of 15% is $4,843.69

c). The present value of investment C at an annual discount rate of 15% is $9,439.85

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