Find the present value of the following cash flow streams. The appropriate inter

Question

Find the present value of the following cash flow streams. The appropriate interest rate is 8%.
Year Cash Stream A Cash Stream B 1 $100 $300 2 $400 $400 3 $400 $400 4 $400 $400 5 $300 $100 Find the present value of the following cash flow streams. The appropriate interest rate is 8%.
Year Cash Stream A Cash Stream B 1 $100 $300 2 $400 $400 3 $400 $400 4 $400 $400 5 $300 $100 Find the present value of the following cash flow streams. The appropriate interest rate is 8%.
Year Cash Stream A Cash Stream B 1 $100 $300 2 $400 $400 3 $400 $400 4 $400 $400 5 $300 $100 Find the present value of the following cash flow streams. The appropriate interest rate is 8%.
Year Cash Stream A Cash Stream B 1 $100 $300 2 $400 $400 3 $400 $400 4 $400 $400 5 $300 $100
Year Cash Stream A Cash Stream B 1 $100 $300 2 $400 $400 3 $400 $400 4 $400 $400 5 $300 $100

Explanation / Answer

Solution :

The present value of cash stream A = $ 100/(1+0.08)1 + $ 400 / ( 1+0.08)2 + $ 400/(1+0.08)3 + $ 400/(1+0.08)4 + $ 300/(1+0.08)5

The present value of cash stream A = $ 92.59 + $ 342.93 + $ 317.53 + $ 294.01 + $ 204.17

The present value of cash stream A = $ 1,251.23

The present value of cash stream B = $ 300/(1+0.08)1 + $ 400/(1+.08)2 + $ 400/(1+.08)3 + $ 400/(1+.08)4 + $ 100/(1+.08)5

The present value of cash stream B = $ 277.77 + $ 342.93 + $ 317.53 + $ 294.01 + $ 68.05

The present value of cash stream B = $ 1,300.29

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