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Relationship between future value and present value

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Relationship between future value and present value: Mixed stream

Using the information in the accompanying table, answer the following questions that follow. Year (t) Cash Flow 1 $ 800 2 900 3 1000 4 1500 5 2000

A. Determine the present value of the mixed stream if 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.

Reference no: EM132670177

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