A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply.

Consider the following case:

The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next four years:

Annual Cash Flows

Year $1$

Year $2$

Year $3$

Year $4$

$$400,000$ $$20,000$ $$180,000$ $$300,000$

The CFO of the company believes that an appropriate annual interest rate on this investment is $9\%.$ What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? $($Note: Do not round your intermediate calculations.$)$

$$600,000$

$$1,775,000$

$$735,327$

$$1,975,000$

Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments:

Description

Uneven Cash Flows

Annuity Payments

Debbie has been donating $10\%$ of her salary at the end of every year to charity for the last three years. Her salary increased by $15\%$ every year in the last three years.

You deposit a certain equal amount of money every year into your pension fund.

Amit receives quarterly dividends from his investment in a high$-$dividend yield, index exchange$$traded fund.

Aakash borrowed some money from his friend to start a new business. He promises to pay his friend $$2,650$ every year for the next five years to pay off his loan along with interest.