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The CFO of the company believes that an appropriate annual interest rate on this investment is 6%. What is the present value of this uneven cash flow stream (rounded to the nearest whole dollar)? O $17,476,298 $13,900,000 O $12,047,954 $18,705,488

The CFO of the company believes that an appropriate annual interest rate on this investment is 6%. What is the present value of this uneven cash flow stream (rounded to the nearest whole dollar)? O $17,476,298 $13,900,000 O $12,047,954 $18,705,488

Essentials Of Investments
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
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8. Unevencash flows A series, or stream, of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and nonconstant, but the concept of the time value of money applies to uneven cash flows as well. Consider the following case: Swanky Beverage Co. expects the following cash flows from its manufacturing plant in Palau over the next 6 years: Year Annual Cash Flows 1 $1,200,000 2 $3,650,000 $5,750,000 $4,400,000 $3,800,000 $4,500,000 3 4 5 6
Transcribed Image Text:8. Unevencash flows A series, or stream, of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and nonconstant, but the concept of the time value of money applies to uneven cash flows as well. Consider the following case: Swanky Beverage Co. expects the following cash flows from its manufacturing plant in Palau over the next 6 years: Year Annual Cash Flows 1 $1,200,000 2 $3,650,000 $5,750,000 $4,400,000 $3,800,000 $4,500,000 3 4 5 6
The CFO of the company believes that an appropriate annual interest rate on this investment is 6%. What is the present value of this uneven cash flow stream (rounded to the nearest whole dollar)? $17,476,298 $13,900,000 $12,047,954 $18,705,488 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments. Description Teresa bought a new dress for her brother's wedding for $450. She negotiated a deal with the retailer in which she would pay for the dress in three installments of $250, $100, and $100 over the next three months. You signed up to make a monthly payment of $10 for one year for a lifetime subscription to your favorite magazine. British consols are British government bonds that promise to make payments of a specified amount at regular intervals to the bearer forever. You receive interest earnings from variable deposits in a regular interest-bearing savings account. Uneven Cash Flows Annuity Payments
Transcribed Image Text:The CFO of the company believes that an appropriate annual interest rate on this investment is 6%. What is the present value of this uneven cash flow stream (rounded to the nearest whole dollar)? $17,476,298 $13,900,000 $12,047,954 $18,705,488 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments. Description Teresa bought a new dress for her brother's wedding for $450. She negotiated a deal with the retailer in which she would pay for the dress in three installments of $250, $100, and $100 over the next three months. You signed up to make a monthly payment of $10 for one year for a lifetime subscription to your favorite magazine. British consols are British government bonds that promise to make payments of a specified amount at regular intervals to the bearer forever. You receive interest earnings from variable deposits in a regular interest-bearing savings account. Uneven Cash Flows Annuity Payments
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