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    PVs of Cash Flow

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    Explain whether this is true or false and indicate why:

    "To find the present value of an uneven series of cash flows, you might find the PVs of the individual cash flows and then sum them. Annuity procedures can never be of use, even if some of the cash flows constitute an annuity (for example, $100 cash for Years 3, 4, 5, and 6), because the entire series is not an annuity."

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    Solution Preview

    This statement is false. An annuity with an uneven cash flow stream is called an embedded annuity, which is what this question is referring to. Annuity procedures can ...

    Solution Summary

    This solution explains if you find the present value of an uneven series of cash flows by finding the present value of the individual cash flows and then adding the totals. I also discuss if it is true that annuity procedures can never be of use, even if some of the cash flows constitute an annuity because the entire series is not an annuity.

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