.Now consider the uneven cash flow stream stemming from the lease agreement give

Question

.Now consider the uneven cash flow stream stemming from the lease agreement given in the case
A. What is the present ( Year o) value of the annual lease cash flows if the opportunity cost rate is 10% annually?
B. What is the future value of this cash flow stream at the end of year 5 if the cash flows are invested at 10% annually?What is the present value of this future value whan discounted at 10%? What does this result indicate about the consistency inherent in time value analyses?
C. Does the office renovation and subsequent lease agreement appear to be a good investment for the company? (Hint: Compare the cost of renovation with the present value of the lease payments. Use a 10 % discount rate for the analysis)

Explanation / Answer

the above question can be solved through following logic ie (a) Pv= 12,000/1.1+(14000/1.1^2)+(2000/1.1^3)+(16000/1.1^4)+( $36152.026 (b)FV= 12,000x1.1^5+(14000x1.1^4)+(2000x1.1^3)+(16000x1.1^2)+ $56749.29

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