Question

a. Find the present values of the following cash flow streams at a 4% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent. 0 1 2 3 4 5 Stream A Stream B Stream A: $ $0 $0 $150 $300 $350 $350 $350 $350 $350 $350 $300 $150 Stream B: $ b. What are the PVs of the streams at a 0% discount rate? Round your answers to the nearest dollar. Stream A: $ Stream B: $

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

А в с D 2 1 Year 1 2 3 Stream A $0.00 $150.00 $350.00 $350.00 $350.00 $300.00 Stream B $0.00 $300.00 $350.00 $350.00 $350.00 $ 150.00 Discount rate 4% 0% PV of Stream A $1,324.73 $1,500 PV of Stream B $1,345.68 $1,500 11 a. 12 b. 13 14 15 2 16 a. 17 b. 18 c. | Annual Payment $900.00 $450.00 $800.00 Years interest rate | Value of Ordinary annuity 10 8% $6,039.07 54% $2,003.32 50% $4,000.00 | Annual Payment $900.00 $450.00 $800.00 Years interest rate Value of annuity due 10 8% $6,522.20 5 4 % $2,083.45 50% $4,000.00

Cell reference -

B C D E ДA 1 2 1 Stream A Stream B 150 300 350 350 7 350 350 350 150 4 350 8 5 300 9 10 Discount rate 11 a. 0.04 12 b. O PV of Stream A P V of Stream B =NPV(B11,C4:08) ENPV(B11,D4:D8) =NPV(B12,C4:08) =NPV(B12,04:08) 13 Years interest rate 0.08 0.04 O Value of Ordinary annuity =PV(D16,C16,-B16,,0) =PV(D17,C17,-B17,,0) =PV(D18,C18,-B18,0) 14 15 2 Annual Payment 16 a. 900 17 b. 450 18 c. 800 5 19 20 d. Annual Payment 900 10 450 5 23 800 5 Years interest rate 0.08 0.04 Value of annuity due =PV(D21,C21,-B21,1) =PV(D22,C22,-B22,,1) =PV(D23, C23,-B23,,1) 24 25

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.