a. Determine the present value of the mixed stream of cash flows using a 5% discount rate.

b. Suppose you had a lump sum equal to your answer in part a on hand today. If you invested this sum for 5 years and earned a 5% return each year how much would you have after 5 years?

c. Determine the future value 5 years from now of the mixed stream, using a 5% interest rate Compare your answer here to your answer in part b.

d. How much would you be willing to pay for an opportunity to buy this stream. assuming that you can at best earn 5% on your investments?

Transcribed Image Text:

Year (t) 0 1 2345 Cash flow $0 $800 $900 $1,000 $1,500 $2,000 Year (t) 0 1 2345 Cash flow $0 $800 $900 $1,000 $1,500 $2,000

Answer rating: 100% (QA)

a Present Value Calculation Year Cashflow PVF5 CashflowPVF 0 1 000 1 800 09524 76190 2 ... View the full answer