Explore BrainMass

Explore BrainMass

    Calculating present value of the given mixed stream

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    See the attached file.

    Relationship between future value and present value-Mixed stream

    Using only the information in the accompanying table, answer the questions that follow.
    a. Determine the present value of the mixed stream of cash flows using a 5% discount rate.
    b. How much would you be willing to pay for an opportunity to buy this stream, assuming that you can at best earn 5% on your investments?
    c. What effect, if any, would a 7% rather than a 5% opportunity cost have on your analysis? (Explain verbally).

    Rate 5%
    Year Cash flow Factor
    1 800 1.05
    2 900 1.102
    3 1000 1.158
    4 1400 1.216
    5 2000 1.276.

    © BrainMass Inc. brainmass.com June 4, 2020, 1:06 am ad1c9bdddf
    https://brainmass.com/business/discounted-cash-flows-model/calculating-present-value-mixed-stream-379325

    Attachments

    Solution Preview

    Please refer attached file for better clarity of tables.

    a. Determine the present value of the mixed stream of cash flows using a 5% discount rate.

    Year Cashflow Factor PV of cash flow
    Cf PVF =Cf/PVF
    1 800 1.05 ...

    Solution Summary

    Solution describes the steps to calculate present value of given mixed cash stream.

    $2.19

    ADVERTISEMENT