FI515 Financial Management: (4-14) Uneven Cash Flow Stream

FI515 Financial Management
Week 2 Homework

(4-14) Uneven Cash Flow Stream
a. Find the present values of the following cash flow streams. The appropriate interest rate is 8%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator’s cash flow register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Chapter 4 Tool Kit.)
Year Cash Stream A Cash Stream B
1 $100 $300
2 400 400
3 400 400
4 400 400
5 300 100
a. Find the present values of the following cash flow streams.
b. What is the value of each cash flow stream at a 0% interest rate?
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