Question

Find the present value of the streams of cash flows shown in the following​ table... Assume that the​ firm's opportunity cost is 11%.

YEAR (a)	CASH FLOW (a)	YEAR (b)	CASH FLOW (b)	YEAR (c)	CASH FLOW (c)
	-1900	1	$10,000	1-5	$10,000/yr
2	$2,900	2-5	$5,200/yr	6-10	$8,000/yr
3	$4,100	6	$7,000
4	$6,000
5	$8,100

The present value of steam A is $____. (Round to the nearest dollar)

The present value of steam B is $____. (Round to the nearest dollar)

The present value of steam C is $____. (Round to the nearest dollar)

Answer 1

1 ) Present value of stream A = $ 12,399

Years (a)	Cash flows $ (a)	PVF@11%	Present value of cash flows $
1	-1,900	0.9009	-1,712
2	2,900	0.8116	2,354
3	4,100	0.7312	2,998
4	6,000	0.6587	3,952
5	8,100	0.5935	4,807
			12,399

2) Present value of stream B = $ 27,284

Years (b)	Cash flows $ (b)	PVF @ 11%	Present value of cash flows $
1	10,000	0.9009	9,009
2	5,200	0.8116	4,220
3	5,200	0.7312	3,802
4	5,200	0.6587	3,425
5	5,200	0.5935	3,086
6	7,000	0.5346	3,742
			27,284

3) Present value of stream C = $ 54,506

Years (c)	Cash flows $ (c)	PVF @11%	Present value of cash flows $
1	10,000	0.9009	9,009
2	10,000	0.8116	8,116
3	10,000	0.7312	7,312
4	10,000	0.6587	6,587
5	10,000	0.5935	5,935
6	8,000	0.5346	4,277
7	8,000	0.4817	3,854
8	8,000	0.4339	3,471
9	8,000	0.3909	3,127
10	8,000	0.3522	2,818
			54,506