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Cash Flow Stream

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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