Year 1 Year 2 Year 3 Year 4 Year 5 $100,000 $20,000 $330,000 $450,000 $750,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? O $450,000 O $2,025,000 O $1,675,000 O $1,409,121 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Uneven Cash Annuity Description Flows Payments Debbie has been donating 10% of her salary at the end of every year to charity for the last three years. Her salary increased by 15% every year in the last three years. You deposit a certain equal amount of money every year into your pension fund. Amit receives quarterly dividends from his investment in a high-dividend yield, index exchange-traded fund. Aakash borrowed some money from his friend to start a new business. He promises to pay his friend $2,650 every year for the next five years to pay off his loan along with interest.
Year 1 Year 2 Year 3 Year 4 Year 5 $100,000 $20,000 $330,000 $450,000 $750,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? O $450,000 O $2,025,000 O $1,675,000 O $1,409,121 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Uneven Cash Annuity Description Flows Payments Debbie has been donating 10% of her salary at the end of every year to charity for the last three years. Her salary increased by 15% every year in the last three years. You deposit a certain equal amount of money every year into your pension fund. Amit receives quarterly dividends from his investment in a high-dividend yield, index exchange-traded fund. Aakash borrowed some money from his friend to start a new business. He promises to pay his friend $2,650 every year for the next five years to pay off his loan along with interest.
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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Transcribed Image Text:7. Uneven cash flows
A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time
value of money will continue to apply.
Consider the following case:
The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next five years:
Annual Cash Flows
Year 2
Year 3
Year 4
Year 5
Year 1
$100,000
$20,000
$330,000
$450,000
$750,000
this investment is 4%. What is the present value of this uneven cash flow
The CFO of the company believes that an appropriate annual interest rate
stream, rounded to the nearest whole dollar?
O $450,000
O $2,025,000
O $1,675,000
O $1,409,121
flows or annuity payments:
Identify whether the situations described in the following table are examples of uneven
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05.Graded Assignment 1.End of Chapter.Time Value of Money
Year 1
Year 2
Year 3
Year 4
Year 5
$100,000
$20,000
$330,000
$450,000
$750,000
The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow
stream, rounded to the nearest whole dollar?
O $450,000
O $2,025,000
O $1,675,000
O $1,409,121
Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments:
Uneven Cash
Annuity
Payments
Description
Flows
Debbie has been donating 10% of her salary at the end of every year to charity for the last three years. Her
salary increased by 15% every year in the last three years.
You deposit a certain equal amount of money every year into your pension fund.
Amit receives quarterly dividends from his investment in a high-dividend yield, index exchange-traded fund.
Aakash borrowed some money from his friend to start a new business. He promises to pay his friend $2,650
every year for the next five years to pay off his loan along with interest.
Expert Solution
Step 1
The present value of cash flows can be calculated by multiplying the annual cash flows with their respective present value factors (PVF). The formula of the same is given below:
Here, 'r' represents the discount rate and 'n' represents the number of years.
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