Consider an uneven cash flow stream:YearCash Flow0$2,0001$2,0002$03$1,5004$2,5005$4,000What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent?What is the value of the cash flow stream at the end of Year 5 if the cash flows are invested in an account that pays 10 percent annually?What cash flow today (Year 0), in lieu of the $2,000 cash flow, would be needed to accumulate $20,000 at the end of Year 5? (Assume that the cash flows for Years 1 through 5 remain the same.)

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 2P

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Consider an uneven cash flow stream:

Year	Cash Flow
0	$2,000
1	$2,000
2	$0
3	$1,500
4	$2,500
5	$4,000

What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent?
What is the value of the cash flow stream at the end of Year 5 if the cash flows are invested in an account that pays 10 percent annually?
What cash flow today (Year 0), in lieu of the $2,000 cash flow, would be needed to accumulate $20,000 at the end of Year 5? (Assume that the cash flows for Years 1 through 5 remain the same.)

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