0 1 2 2,000 2,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hh1.

Account 

1. Consider another uneven cash flow stream:
Year
0
1
2
34
5
Cash Flow (RM)
2,000
2,000
0
1,500
2,500
4,000
a. What is the present (Year 0) value of the cash flow stream if the
opportunity cost rate is 10 percent?
b. What is the future (Year 5) value of the cash flow stream if the cash
flows are invested in an account that pays 10 percent annually?
c. What cash flow today (Year 0), in lieu of the RM2,000 cash flow, would
be needed to accumulate RM20,000 at the end of Year 5? (Assume
that the cash flows for Years 1 through 5 remain the same.)
4
Transcribed Image Text:1. Consider another uneven cash flow stream: Year 0 1 2 34 5 Cash Flow (RM) 2,000 2,000 0 1,500 2,500 4,000 a. What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent? b. What is the future (Year 5) value of the cash flow stream if the cash flows are invested in an account that pays 10 percent annually? c. What cash flow today (Year 0), in lieu of the RM2,000 cash flow, would be needed to accumulate RM20,000 at the end of Year 5? (Assume that the cash flows for Years 1 through 5 remain the same.) 4
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