Find teh present value of the streams of cash flows shown in the following table. Assume that the firms opportunity cost is 14% A: Year Cash Flow 1 -$2100 2 2900 3 4000 4 5900 5 8200 B: Year Cash Flow 1 $9000 2-5 $5000/yr 6 $7200 C: Year Cash Flow 1-5 $12000/yr 6-10 $8000/yr The presevent vaule of stream A, B, and C

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Q: $1,000 $1,000 2T $500 $500 2 3 4 5 6 2 3 4 5 EOY EOY 3T.

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.