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You are given the following cash flow information. The appropriate discount rate is 4 percent for...

You are given the following cash flow information. The appropriate discount rate is 4 percent for years 1-6 and 6 percent for years 7-12. Payments are received at the end of each year.

Year Amount
1-6 $25,000
7-12 $35,000

What is the present value of the income stream above?

***Please show your work***

Solutions

Expert Solution

Ans $ 276056.21

Year Project Cash Flows (i) DF@ 4% (ii) PV of Project A ( (i) * (ii) )
1 25000 0.962                     24,038.46
2 25000 0.925                     23,113.91
3 25000 0.889                     22,224.91
4 25000 0.855                     21,370.10
5 25000 0.822                     20,548.18
6 25000 0.790                     19,757.86
7 35000 0.760                     26,597.12
8 35000 0.731                     25,574.16
9 35000 0.703                     24,590.54
10 35000 0.676                     23,644.75
11 35000 0.650                     22,735.33
12 35000 0.625                     21,860.90
NPV                  2,76,056.21

jeff jeffy answered 1 year ago
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