QUESTION 2

You are given an uneven cash flow stream as follows:

Year Cash Flow (RM) 0 2,000 1 3,000 2 0 3 1,800 4 2,700 5 4,500

a) What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent?

b) What is the future (Year 5) value of the cash flow stream if the cash flows are invested in an account that pays 10 percent annually?

c) What cash flow today (Year 0), in lieu of the RM2,000 cash flow, would be needed to accumulate RM25,000 at the end of Year 5? (Assume that the cash flows for Years 1 through 5 remain the same.)