Question

UNEVEN CASH FLOW STREAM

1. Find the present values of the following cash flow streams at a 4% discount rate. Round your answers to the nearest cent.

   0

   1

   2

   3

   4

   5

   Stream A	$0	$150	$400	$400	$400	$300
   Stream B	$0	$300	$400	$400	$400	$150

   Stream A $  

   Stream B $  

2. What are the PVs of the streams at a 0% discount rate?

   Stream A $  

   Stream B $  

Answer 1

a.Stream A

Net present value can be solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$0. Since there is no initial cash flow for this question.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 4%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.  

Net present value at 4% discount rate is $1,458.15.

Stream B

Net present value can be solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$0. Since there is no initial cash flow for this question.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 4%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.  

Net present value at 4% discount rate is $1,479.09.

b.Stream A

Net present value can be solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$0. Since there is no initial cash flow for this question.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 0%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.  

Net present value at 0% discount rate is $1,650.

Stream B

Net present value can be solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= -$0. Since there is no initial cash flow for this question.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 0%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.  

Net present value at 0% discount rate is $1,650.

In case of any query, kindly comment on the solution.