Question
Using the information in the accompanying table, answer the questions that follow. a. Determine the present value of the mixed stream of cash flows using
Using the information in the accompanying table, answer the questions that follow.
a. Determine the present value of the mixed stream of cash flows using a 5% discount rate.
b. Suppose you had a lump sum equal to your answer in part a on hand today. If you invested this sum for 5 years and earned a 5% return each year, how much would you have after 5 years?
c. Determine the future value 5 years from now of the mixed stream, using a 5% interest rate. Compare your answer here to your answer in part b.
d. How much would you be willing to pay for an opportunity to buy this stream, assuming that you can at best earn 5% on your investments?
Year (t)____________Cash flow
0……………………………..$0
1…………………………..$800
2…………………………..$900
3………………………...$1,000
4………………………...$1,500
5………………………...$2,000
Step by Step Solution
3.39 Rating (158 Votes )
There are 3 Steps involved in it
Step: 1
a Present value cash flow 1discount raten So for example to discount ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Document Format ( 2 attachments)
60941c4003b19_24496.pdf
180 KBs PDF File
60941c4003b19_24496.docx
120 KBs Word File
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started