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# Cash Flow Stream

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P3-10. Given the mixed streams of cash flows shown in the following table, answer parts (a) and (b):

Cash Flow Stream

Year A B

1 \$ 50,000 \$ 10,000

2 40,000 20,000

3 30,000 30,000

4 20,000 40,000

5 10,000 50,000

Totals \$150,000 \$150,000

a. Find the present value of each stream, using a 15 percent discount rate.

b. Compare the calculated present values, and discuss them in light of the fact that the undis-
counted total cash flows amount to \$150,000 in each case.

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## Cash flows, present value, cash flow streams, investments

1) Seaborn Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value 18 percent? At 24 percent?

Year Cash Flow
1 \$950
2 \$1040
3 \$1130
4 \$1075

2.) Investment X offers to pay you \$6,000 per year for nine years, whereas Investment Y offers to pay you \$8,000 per year for six years. Which of these cash flows streams has the higher present value if the discount rate is 5 percent? If the discount rate is 15 percent?

3.) An investment offers \$5,300 per year for 15 years, with the first payment occurring one year from now. If the required return is 7 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75? Forever?

4.) If you put up \$34,000 today in exchange for a 7.65 percent, 15-year annuity, what will the annual cash flow be?

5.) Your company will generate \$73,000 in annual revenue each year for the next eight years from a new information database. If the appropriate interest rate is 8.5 percent, what is the percent value of the savings?

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