Question

1. Find the present value as of year 0 of the following cash-flow stream if investments of similar risk are yielding 8%

Year​​ Cash Flow

0 through 14 ​​ $8,000 per year in each of those years

2. Find the present value as of year 0 of the following cashflow stream if investments of similar risk are yielding 8.25%

Year ​​ Cash Flow

6 through 28​ ​$8,000 per year in each of those years

Answer 1

Answer : 1) Calculation of Present Value :

Present Value of Following Cash Flow in year 0

Year	Cash Flows	PVF @ 8%	Present Value of Cash Flows
0	8000	1	8000
1	8000	0.925925926	7407.407407
2	8000	0.85733882	6858.710562
3	8000	0.793832241	6350.657928
4	8000	0.735029853	5880.238822
5	8000	0.680583197	5444.665576
6	8000	0.630169627	5041.357015
7	8000	0.583490395	4667.923162
8	8000	0.540268885	4322.151076
9	8000	0.500248967	4001.991737
10	8000	0.463193488	3705.547905
11	8000	0.428882859	3431.062875
12	8000	0.397113759	3176.910069
13	8000	0.367697925	2941.583397
14	8000	0.340461041	2723.688331
		Present value of Cash Flows	73953.89586

Answer : 2.) Calculation of Present Value of Cash Flow as of year 0 through 6 to 28 years

Year	Cash Flows	PVF @ 8.25%	Present Value of Cash Flows
0	0	1	0
1	0	0.923787529	0
2	0	0.853383398	0
3	0	0.788344941	0
4	0	0.728263225	0
5	0	0.672760485	0
6	8000	0.621487746	4971.901966
7	8000	0.574122629	4592.981031
8	8000	0.530367325	4242.938597
9	8000	0.48994672	3919.573762
10	8000	0.45260667	3620.85336
11	8000	0.418112397	3344.899177
12	8000	0.386247018	3089.976145
13	8000	0.356810178	2854.481428
14	8000	0.329616793	2636.934344
15	8000	0.304495883	2435.967062
16	8000	0.281289499	2250.315992
17	8000	0.259851731	2078.81385
18	8000	0.240047789	1920.382309
19	8000	0.221753153	1774.025228
20	8000	0.204852798	1638.822381
21	8000	0.18924046	1513.923678
22	8000	0.174817977	1398.543813
23	8000	0.161494667	1291.957333
24	8000	0.149186759	1193.494072
25	8000	0.137816867	1102.53494
26	8000	0.127313503	1018.508028
27	8000	0.117610627	940.8850139
28	8000	0.10864723	869.177842
		Present value of Cash Flows	54701.89135