Problem 4-14

Uneven Cash Flow Stream

a. Find the present values of the following cash flow streams. The appropriate interest rate is 6%. Round your answers to the nearest cent. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Chapter 4 Tool Kit.)

Year Cash Stream A Cash Stream B

1 $100 $300

2 400 400

3 400 400

4 400 400

5 300 100

Stream A $

Stream B $

b. What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest cent.

Stream A $

Stream B $