Annual Cash Flows (Millions of dollars) Year 1 Year 2 Year 3 Year 4 Year 5 $250

Question

Annual Cash Flows (Millions of dollars) Year 1 Year 2 Year 3 Year 4 Year 5 $250 $375 $330 $450 $350 The CFO of the company believes that an appropriate annual interest rate on this investment is 9%, what is the present value of this uneven cash flow stream? O $1,500.00 million O $955.00 million O $1,346.08 million O $2,305.00 million Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments Uneven Annuity Payments Description Cash Flows Aakash borrowed some money from his friend to start a new business. He promises to pay his friend $2,650 every year for the next five years to pay off his loan along with interest. Amit receives quarterly dividends from his investment in a high-dividend yield, index exchange-traded fund

Explanation / Answer

1.
Present Value=250/1.09+375/1.09^2+330/1.09^3+450/1.09^4+350/1.09^5=1346.075674
Option C

2.
Annuity Payments

3.
Uneven cash flows

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