Question

(Present value of an uneven stream of payments) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows Investment End of Year $ A 5 3,000 4000 5.000 (6.000) 6000 $1,000 1.000 1.000 1.000 5,000 5.000 (5.000) (5.000) 15.000 What is the present value of each of these three Investments if the appropriate discount rate is 14 percent?

Answer 1

A
	Cash flow	PV factor 14%	PV
1	3000	0.8772	2,631.58
2	4000	0.7695	3,077.87
3	5000	0.6750	3,374.86
4	-6000	0.5921	-3,552.48
5	6000	0.5194	3,116.21
Present value of Cash Flow			8,648.04
B
	Cash flow	PV factor 14%	PV
1	1000	0.8772	877.19
2	1000	0.7695	769.47
3	1000	0.6750	674.97
4	1000	0.5921	592.08
5	3000	0.5194	1,558.11
Present value of Cash Flow			4,471.82
C
	Cash flow	PV factor 14%	PV
1	5000	0.8772	4,385.96
2	5000	0.7695	3,847.34
3	-5000	0.6750	-3,374.86
4	-5000	0.5921	-2,960.40
5	15000	0.5194	7,790.53
Present value of Cash Flow			9,688.57