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14 15 16 17 Question #2(b): Present Value & Multiple Cash Flows Investment A offers to pay you $5,500 per year for 9 years Investment B offers to pay you $8,000 per year for 5 years The discount rate = 5% Which of these 2 cash flow streams has higher present value? 18 19 20 21 PV of Annuity Calculations: PVA Years Interest Rates FV of Annuity 9 5 5.0% 5.0% $5,500 8,000 PVA PVA Cx (1-1/(1+r)"}/r $39,093.0 $34,635.8 22 23 24 25 26 27 28