Year 1 Year 2 Year 3 Year 4 Year 5 $100,000 $20,000 $330,000 $450,000 $750,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? O $450,000 O $2,025,000 O $1,675,000 O $1,409,121 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Uneven Cash Annuity Description Flows Payments Debbie has been donating 10% of her salary at the end of every year to charity for the last three years. Her salary increased by 15% every year in the last three years. You deposit a certain equal amount of money every year into your pension fund. Amit receives quarterly dividends from his investment in a high-dividend yield, index exchange-traded fund. Aakash borrowed some money from his friend to start a new business. He promises to pay his friend $2,650 every year for the next five years to pay off his loan along with interest.
Year 1 Year 2 Year 3 Year 4 Year 5 $100,000 $20,000 $330,000 $450,000 $750,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? O $450,000 O $2,025,000 O $1,675,000 O $1,409,121 Identify whether the situations described in the following table are examples of uneven cash flows or annuity payments: Uneven Cash Annuity Description Flows Payments Debbie has been donating 10% of her salary at the end of every year to charity for the last three years. Her salary increased by 15% every year in the last three years. You deposit a certain equal amount of money every year into your pension fund. Amit receives quarterly dividends from his investment in a high-dividend yield, index exchange-traded fund. Aakash borrowed some money from his friend to start a new business. He promises to pay his friend $2,650 every year for the next five years to pay off his loan along with interest.
Chapter3: International Financial Markets
Section: Chapter Questions
Problem 3BIC
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Step 1
The present value of cash flows can be calculated by multiplying the annual cash flows with their respective present value factors (PVF). The formula of the same is given below:
Here, 'r' represents the discount rate and 'n' represents the number of years.
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