lated in part a? Explain. 34 Relationship between future value and present value: Mixed stream Using the infor- mation in the accompanying table, answer the questions that follow. Year (t) Cash flow 1 $ 800 900 3 1,000 4. 1,500 2,000 a. Determine the present value of the mixed stream of cash flows using a 5% dis- count 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 verblly.)

lated in part a? Explain. 34 Relationship between future value and present value: Mixed stream Using the infor- mation in the accompanying table, answer the questions that follow. Year (t) Cash flow 1 $ 800 900 3 1,000 4. 1,500 2,000 a. Determine the present value of the mixed stream of cash flows using a 5% dis- count 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 verblly.)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.12: Uneven, Or Irregular, Cash Flows

Problem 3ST

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