# Question: Use the following table of cash flows to answer parts

Use the following table of cash flows to answer parts (a) and (b). Assume an 8% discount rate.

End of Year Cash Flow

1............... $10,000

2............... 10,000

3............... 10,000

4............... 12,000

5............... 12,000

6............... 12,000

7............... 12,000

8............... 15,000

9............... 15,000

10................ 15,000

a. Solve for the present value of the cash flow stream by summing the present value of each individual cash flow.

b. Solve for the present value by summing the present value of the three separate annuities (one current and two deferred).

End of Year Cash Flow

1............... $10,000

2............... 10,000

3............... 10,000

4............... 12,000

5............... 12,000

6............... 12,000

7............... 12,000

8............... 15,000

9............... 15,000

10................ 15,000

a. Solve for the present value of the cash flow stream by summing the present value of each individual cash flow.

b. Solve for the present value by summing the present value of the three separate annuities (one current and two deferred).

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