Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table, . a. Find the present value of each stream using a 7% discount rate. b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $80,000 in each case. Is there some discount rate at which the present values of the two streams would be equal? a. The present value of the cash flows of stream A is $ 61413. (Round to the nearest dollar.) The present value of the cash flows of stream B is $ 78016. (Round to the nearest dollar.) b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $80,000 in each case. (Select the best answer below.) OB. Cash flow stream. with a present value of $61,413, is lower than cash flow stream B's present value of $78,016 because the negative cash inflow occurs in A in the early years, while the positive cash flows are received further in the future. OA. Cash flow stream A, with a present value of $61,413, is higher than cash flow stream B's present value of $78,016 because the negative cash inflow occurs in A in the later years when their present value cash flows are received in the earlier years. greater, while the negative OC. Cash flow stream A, with a present value of $61,413, is higher than cash flow stream B's present value of $78,016 because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flow is received further in the future. OD. Cash flow stream. with a present value of $78,016, is higher than cash flow stream B's present value of $61,413 because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flows is received further in the future.
Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table, . a. Find the present value of each stream using a 7% discount rate. b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $80,000 in each case. Is there some discount rate at which the present values of the two streams would be equal? a. The present value of the cash flows of stream A is $ 61413. (Round to the nearest dollar.) The present value of the cash flows of stream B is $ 78016. (Round to the nearest dollar.) b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $80,000 in each case. (Select the best answer below.) OB. Cash flow stream. with a present value of $61,413, is lower than cash flow stream B's present value of $78,016 because the negative cash inflow occurs in A in the early years, while the positive cash flows are received further in the future. OA. Cash flow stream A, with a present value of $61,413, is higher than cash flow stream B's present value of $78,016 because the negative cash inflow occurs in A in the later years when their present value cash flows are received in the earlier years. greater, while the negative OC. Cash flow stream A, with a present value of $61,413, is higher than cash flow stream B's present value of $78,016 because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flow is received further in the future. OD. Cash flow stream. with a present value of $78,016, is higher than cash flow stream B's present value of $61,413 because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flows is received further in the future.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 13MC: Which of the following discounts future cash flows to their present value at the expected rate of...
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Transcribed Image Text:Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table,
a. Find the present value of each stream using a 7% discount rate.
b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $80,000 in each case. Is there some discount rate at which the present values of the two streams would be equal?
a. The present value of the cash flows stream A is $ 61413. (Round to the nearest dollar.)
The present value of the cash flows of stream B is $ 78016. (Round to the nearest dollar.)
b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $80,000 in each case. (Select the best answer below.)
O A. Cash flow stream A, with a present value of $61,413, is higher than cash flow stream B's present value of $78,016 because the negative cash inflow occurs in A in the later years when their present value is greater, while the negative
cash flows are received in the earlier years
OB. Cash flow stream A, with a present value of $61,413, is lower than cash flow stream B's present value of $78,016 because the negative cash inflow occurs in A in the early years, while the positive cash flows are received further in the
future.
OC. Cash flow stream A, with a present value of $61,413, is higher than cash flow stream B's present value of $78,016 because the positive cash inflows occur in A in the early years when their present value
cash flow is received further in the future.
O D. Cash flow stream A, with a present value of $78,016, is higher than cash flow stream B's present value of $61,413 because the positive cash inflows occur in A in the early years when their present value
cash flows received further the future.
greater, while the negative
greater, while the negative
Transcribed Image Text:Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table,
a. Find the present value of each stream using a 7% discount rate.
b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $80,000 in each case. Is there some discount rate at which the present values of the two streams would be equal?
a. The present value of the cash flows of stream A is $ 61413. (Round
The present value of the cash flows of stream B is $78016. (Round to
b. Compare the calculated present values and discuss them in light of t
OA. Cash flow stream A, with a present value of $61,413, is higher t
cash flows are received in the earlier years.
OB. Cash flow stream A, with a present value of $61,413, is lower th
future.
OC. Cash flow stream A, with a present value of $61,413, is higher t
cash flow is received further in the future.
O D. Cash flow stream A, with a present value of $78,016, is higher 1
cash flows is received further in the future.
Data Table
(Click on the icon here in order to copy the contents of the data table below
into a spreadsheet.)
Year
0
1
2
3
4
Totals
Print
Cash flow stream
A
B
$-60,000
$20,000
$50,000
$30,000
$40,000
$40,000
$30,000
$20,000
$80,000
$50,000
$-60,000
$80,000
Done
X
later years when their present value is greater, while the negative
arly years, while the positive cash flows are received further in the
arly years when their present value is greater, while the negative
arly years when their present value is greater, while the negative
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