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Ch 05: Assignment - Time Value of Money 11. Uneven cash flows A series of cash flows may not always necessarly be an annuity. Cash
Ch 05: Assignment - Time Value of Money 11. Uneven cash flows A series of cash flows may not always necessarly 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 cases The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next five years: Year 1 $250,000 Annual Cash Flows Year 2 Year 3 Year 4 $37.500 $480,000 $300.000 Year 5 S550.000 The CFO of the company believes that an appropriate annual interest rate on this westment is 4%. What is the present value of this uneven cash flow stream, Founded to the nearest whole dollar? O $1,410,275 O $2,167,500 O $1,650,000 O $767,500 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments Uneven Cash Flows Annuity Payments Description Debbis has been donating 10% of her salary at the end of every year to charity for the last three years. Her salary meressed by 15% every year the last three years You deposit a certain equal amount of money every year into your pension lund. O Ant 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 52.650 every year for the next five years to pay off his on along with interest 0
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