Question
Consider the mixed streams of cash flows shown in the following table, Year A B 1 $37,500 $12,500 2 $31,250 $18,750 3 $25,000 $25,000 4
Consider the mixed streams of cash flows shown in the following table,
| Year | A | B |
|---|---|---|
| 1 | $37,500 | $12,500 |
| 2 | $31,250 | $18,750 |
| 3 | $25,000 | $25,000 |
| 4 | $18,750 | $31,250 |
| 5 | $12,500 | $37,500 |
| Totals | $125,000 | $125,000 |
a.Find the present value of each stream using a 15% discount rate.
b.Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $125,000 in each case.
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Challenging Global Finance
Authors: Elizabeth Friesen
2012th Edition
0230348793, 978-0230348790
