Present value-Mixed streams Consider the mixed streams of cash flows shown in the following table, 1. a. Find the present value of each stream using a 5% discount rate. b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $50,000 in each case. Is there some discount rate at which the present values of the two streams would be equal? a. The present value of the cash flows of stream A is $ The present value of the cash flows of stream B is $ (Round to the nearest dollar.) (Round to the nearest dollar.) b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $50,000 in each case. (Select the best answer below.) A. Cash flow stream A, with a present value of $40,810, is higher than cash flow stream B's present value of $49,677 because the negative cash inflow occurs in A in the later years when their present value is greater, while the negative cash flows are received in the earlier years. OB. Cash flow stream A, with a present value of $49,677, is higher than cash flow stream B's present value of $40,810 because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flows is received further in the future. ○ C. Cash flow stream A, with a present value of $40,810, is lower than cash flow stream B's present value of $49,677 because the negative cash inflow occurs in A in the early years, while the positive cash flows are received further in the future. OD. Cash flow stream A, with a present value of $40,810, is higher than cash flow stream B's present value of $49,677 because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flow is received further in the future. 1: Data Table (Click on the icon located on the top-right comer of the data table below in order to copy its contents into a spreadsheet.) Cash flow stream Year A B о $-50,000 $10,000 1 $40,000 $20,000 2 $30,000 $30,000 3 $20,000 $40,000 4 $10,000 S-50,000 Totals $50,000 $50,000

Present value-Mixed streams Consider the mixed streams of cash flows shown in the following table, 1. a. Find the present value of each stream using a 5% discount rate. b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $50,000 in each case. Is there some discount rate at which the present values of the two streams would be equal? a. The present value of the cash flows of stream A is $ The present value of the cash flows of stream B is $ (Round to the nearest dollar.) (Round to the nearest dollar.) b. Compare the calculated present values and discuss them in light of the undiscounted cash flows totaling $50,000 in each case. (Select the best answer below.) A. Cash flow stream A, with a present value of $40,810, is higher than cash flow stream B's present value of $49,677 because the negative cash inflow occurs in A in the later years when their present value is greater, while the negative cash flows are received in the earlier years. OB. Cash flow stream A, with a present value of $49,677, is higher than cash flow stream B's present value of $40,810 because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flows is received further in the future. ○ C. Cash flow stream A, with a present value of $40,810, is lower than cash flow stream B's present value of $49,677 because the negative cash inflow occurs in A in the early years, while the positive cash flows are received further in the future. OD. Cash flow stream A, with a present value of $40,810, is higher than cash flow stream B's present value of $49,677 because the positive cash inflows occur in A in the early years when their present value is greater, while the negative cash flow is received further in the future. 1: Data Table (Click on the icon located on the top-right comer of the data table below in order to copy its contents into a spreadsheet.) Cash flow stream Year A B о $-50,000 $10,000 1 $40,000 $20,000 2 $30,000 $30,000 3 $20,000 $40,000 4 $10,000 S-50,000 Totals $50,000 $50,000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 13MC: Which of the following discounts future cash flows to their present value at the expected rate of...

See similar textbooks