Question: Can someone please help me with the below problems? I'm trying to get the formulas to work in Excel and get the correct answers, but
Can someone please help me with the below problems? I'm trying to get the formulas to work in Excel and get the correct answers, but I am not having luck.
Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table.
| Year | A | B |
|---|---|---|
| 0 | ($50000) | $10,000 |
| 1 | 40,000 | 20,000 |
| 2 | 30,000 | 30,000 |
| 3 | 20,000 | 40,000 |
| 4 | 10,000 | -50,000 |
| Totals | $50,000 | $50,000 |
The cash flow received in year 1 of stream A, FV , is $ . (Round to the nearest dollar.)
The number of years, n, the first cash flow of stream A will be discounted is year(s). (Type a whole number.)
The present value of the cash flow received at the end of year 1 of stream A is $ . (Round to the nearest cent.)
The cash flow received in year 2 of stream A, FV , is $ . (Round to the nearest dollar.)
The number of years, n, the second cash flow of stream A will be discounted is year(s). (Type a whole number.)
The present value of the cash flow received at the end of year 2 of stream A is $ . (Round to the nearest cent.)
The cash flow received in year 3 of stream A, FV , is $ . (Round to the nearest dollar.)
The number of years, n, the third cash flow of stream A will be discounted is year(s). (Type a whole number.)
The present value of the cash flow received at the end of year 3 of stream A is $ . (Round to the nearest cent.)
The cash flow received in year 4 of stream A, FV , is $ . (Round to the nearest dollar.)
The number of years, n, the fourth cash flow of stream A will be discounted is year(s). (Type a whole number.)
The present value of the cash flow received at the end of year 4 of stream A is $ . (Round to the nearest cent.)
The cash flow in year 0 of stream A is $ . (Round to the nearest dollar.)
The present value of the cash flows of stream A is $ . (Round to the nearest dollar.)
Follow the same steps above to compute the present value of the cash flows of stream B.
The present value of the cash flow received at the end of year 1 of stream B, , is $ . (Round to the nearest cent.)
The present value of the cash flow received at the end of year 2 of stream B, , is $ . (Round to the nearest cent.)
The present value of the cash flow received at the end of year 3 of stream B, , is $ . (Round to the nearest cent.)
The present value of the cash flow received at the end of year 4 of stream B, , is $ . (Round to the nearest cent.)
The cash flow in year 0 of stream B is $ . (Round to the nearest dollar.) The present value of the cash flows of stream B is $ . (Round to the nearest dollar.)
-
Find the present value of each stream using a 5% discount rate.
-
Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $50,000 in each case. Is there some discount rate at which the present values of the two streams would be equal?
A. Cash flow stream A, with a present value of $ , is higher than cash flow stream B's present value of $ because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flow is received further in the future.
B. Cash flow stream A, with a present value of $ , is higher than cash flow stream B's present value of $ because the positive cash inflows occur in A in the later years when their present value is greater, while the negative cash flow is received in the earlier years.
C. Cash flow stream A, with a present value of $ , is lower than cash flow stream B's present value of $ because the negative cash inflow occurs in A in the early years when its present value is greater, while the positive cash flows are received further in the future.
D. Cash flow stream A, with a present value of $ , is higher than cash flow stream B's present value of $ because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flow is received further in the future.
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
