Question

Find the present values of the following cash flow streams. The appropriate interest rate is 12%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Ch04 Tool Kit.xlsx.) Do not round intermediate calculations. Round your answers to the nearest cent.

Year   Cash Stream A Cash Stream B

1 $100 $300

2 400     400

3 400 400

4 400 400

5 300 100

Present Value for Stream A?

Present Value for Stream B?

What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest dollar.

Stream A ?

Stream B ?

Answer 1

EXCEL FORMULA: