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Question 5: You have a choice of accepting either of two 5-year cash flow streams or single amounts. One cash flow stream is an ordinary
Question 5: You have a choice of accepting either of two 5-year cash flow streams or single amounts. One cash flow stream is an ordinary annuity, and the other is a mixed stream. You may accept alternative A or B, either as a cash flow stream or as a single amount. Given the cash flow stream and single amounts associated with each (see the following table), and assuming a 9% opportunity cost, which alternative (A or B) and in which form (cash flow stream or single amount) would you prefer? End of year 1 2 3 4 Cash flow stream Alternative A Alternative B $700 $1,100 700 900 700 700 700 500 700 300 | 5 Single amount $2,800 At time zero $2,825
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