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  • Assignment 2

    Diunggah oleh

    Daria Chernetsova
    14 tayangan3 halaman
    The document presents a calculation of the present value of two cash flow streams, A and B, using an 8% discount rate. It finds that cash flow stream A has a higher present value of $61,330 compared to $66,231 for cash flow stream B, despite both streams having undiscounted total cash flows of $80,000. This is because cash flow stream A has higher cash flows in earlier years which are more heavily weighted in present value calculations.

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    © Attribution Non-Commercial (BY-NC)

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    The document presents a calculation of the present value of two cash flow streams, A and B, using an 8% discount rate. It finds that cash flow stream A has a higher present value of $61,330 compared to $66,231 for cash flow stream B, despite both streams having undiscounted total cash flows of $80,000. This is because cash flow stream A has higher cash flows in earlier years which are more heavily weighted in present value calculations.

    Hak Cipta:

    Attribution Non-Commercial (BY-NC)
    Unduh sebagai DOC, PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    14 tayangan3 halaman

    Assignment 2

    Diunggah oleh

    Daria Chernetsova
    The document presents a calculation of the present value of two cash flow streams, A and B, using an 8% discount rate. It finds that cash flow stream A has a higher present value of $61,330 compared to $66,231 for cash flow stream B, despite both streams having undiscounted total cash flows of $80,000. This is because cash flow stream A has higher cash flows in earlier years which are more heavily weighted in present value calculations.

    Hak Cipta:

    Attribution Non-Commercial (BY-NC)
    Unduh sebagai DOC, PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    dari 3

    Daria Chernetsova 822-694-022 11-18-2013

    Assignment 2 Consider the mix stream of cash flows shown in the following table. Year 1 2 3 4 5 Total 25000 18000 16000 12000 9000 80000 Project A 9000 11000 15000 19000 26000 80000 Project B

    #1. ind the !resent "al#e of each stream #sing an 8$ disco#nt rate. #2. Com!are the calc#lated !resent "al#es and disc#ss them in light of the fact that the #ndisco#nted cash flows total %80&000 in each case. SOLUTION: #1. Cash Flow Stream Year 1 2 3 4 5 Total Year 1 2 3 4 5 Total P! " F! # $% & ' ( %))*+t %25000'0.9260 %18000'0.85(3 %16000'0.(940 %12000'0.(350 %9000'0.6806 %23150 %15432 %12(04 %8820 %6125 %66231 P! %8333 %9430 %1190( %13965 %1(695 %61330 P!

    Cash Flow Stream

    P! " F! # $% & ' ( %))*+t %9000'0.9260 %11000'0.85(3 %15000'0.(940 %19000'0.(350 %26000'0.6806

    #2. )a"ing calc#lated both cash flow streams& we can concl#de that the cash flow stream * has a higher !resent "al#e than the cash flow stream + d#e to the fact that the cash flow stream * has higher cash flows in the first ,ears when their !resent "al#e is greater while the lower cash flows are recei"ed later in the f#t#re. -n case of cash flow stream + the sit#ation is com!letel, o!!osite. .es!ite the fact that both #ndisco#nted cash flows e/#al each other and e/#al %80000 in each case& the high cash flows in the first ,ears of the stream * lead to the higher !resent "al#e.

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