Below are two cash flow streams, A and B$.$ Assuming that you have a $9\%$ opportunity cost, which stream do you prefer? Under each stream is a lump sum. If you like, you can choose the lump sum rather than the stream. For example, you can choose $$2,825$ right now rather than collect the cash flow stream A over the five years. For each alternative, A and B$,$ do you prefer the lump sum or the stream? Finally, if you can choose either lump sum or either stream, which choice would you take?

Cash Flow Streams

Year Alternative A Alternative B

$1.$ $ $700$ $$1,100$

$2.$ $ $700$ $ $900$

$3.$ $ $700$ $ $700$

$4.$ $ $700$ $ $500$

$5.$ $ $700$ $ $300$

Lump Sum $$2,825($for alt a$)$ $$2,800($for alt b$)$

$($at t$=0)$