# Question: Using the time value of money Use the Present Value

Using the time value of money Use the Present Value of $ 1 table (Appendix B, Table B- 1) to determine the present value of $ 1 received one year from now. Assume an 8% interest rate. Use the same table to find the present value of $ 1 received two years from now. Continue this process for a total of five years. Round to three decimal places.

Requirements

1. What is the total present value of the cash flows received over the five- year period?

2. Could you characterize this stream of cash flows as an annuity? Why or why not?

3. Use the Present Value of Annuity of $ 1 table (Appendix B, Table B-2) to determine the present value of the same stream of cash flows. Compare your results to your answer to Requirement 1.

4. Explain your findings.

Requirements

1. What is the total present value of the cash flows received over the five- year period?

2. Could you characterize this stream of cash flows as an annuity? Why or why not?

3. Use the Present Value of Annuity of $ 1 table (Appendix B, Table B-2) to determine the present value of the same stream of cash flows. Compare your results to your answer to Requirement 1.

4. Explain your findings.

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