Which of the following cash flows - A or B has a larger present value for this
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Which of the following cash flows - A or B has a larger present value for this investor in the conditions described?
Consider 2 streams of cash flows: A and B. In case of A, the investor gets paid 110 euros exactly in 1 year, 225 euros exactly in 2 years and 320 euros in 3 years. In case of B, the investor gets paid 220 euros exactly in 1 year, 135 euros exactly in 2 years and 300 euros in 3 years. Suppose that both cash flows are associated with the same level of risk. According to investor’s opportunity costs, the appropriate discount rate to discount future cash flows of A and B is 5%.
Related Book For
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen
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