# Present Value

Please help answer the following problems.

A. Find the present values of the following cash flow streams at 8% compounded annually.

0 1 2 3 4 5

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Stream A $0 $100 $400 $400 $400 $300

Stream B $0 $300 $400 $400 $400 $100

B. What are the PVs of the streams at 0% compounded annually?

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#### Solution Preview

Please see the attached file:

a. Find the present values of the following cash flow streams at 8% compounded annually.

0 1 2 3 4 5

Stream A $0 $100 $400 $400 $400 $300

Stream B $0 $300 $400 $400 $400 $100

To calculate the PV ( Present Value) we discount the cash flow at the given discount rate

Stream A

discount rate= 8%

Year Cash flow PV factor @8.% Discounted cash flow=

0 $0 1 0.00 =0*1

1 $100 0.925926 92.59 =100*0.925926

2 $400 ...

#### Solution Summary

This solution helps calculates present value of cash flows.