Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table, 1. Find the present value of each stream using a 5% discount rate. . Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $70,000 in each case. Is there some discount rate at which the present values of the two streams would be equal?
Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table, 1. Find the present value of each stream using a 5% discount rate. . Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $70,000 in each case. Is there some discount rate at which the present values of the two streams would be equal?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:Year
0
1
2
3
4
Totals
Cash flow stream
A
$-52,500
$43,750
$35,000
$26,250
$17,500
$70,000
B
$17,500
$26,250
$35,000
$43,750
$-52,500
$70,000
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 5% discount rate.
b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $70,000 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 $. (Round to the nearest dollar.)
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