# Question

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).

## Answer to relevant Questions

Consumer Insurance, Inc. sells extended warranties on appliances that provide coverage after the manufacturers' warranties expire. An analyst for the company forecasts that the company will have to pay warranty claims of $5 ...Consider the following three investments of equal risk. Which offers the greatest rate of return? Determine the annual payment required to fund a future annual annuity of $12,000 per year. You will fund this future liability over the next five years, with the first payment to occur one year from today. The future $12,000 ...1. What is the monthly payment? 2. How much of the first payment is interest? 3. How much of the first payment is principal? 4. How much will Casino.com Corporation owe on this loan after making monthly payments for three ...An oil well produces 20,000 barrels of oil per year. Suppose the price of oil is $50 per barrel. You want to purchase the right to the oil produced by this well for the next five years. At a discount rate of 10%, what is the ...Post your question

0