Consider another set of net cash flow Year Cash Flow____ 0 yeasr $2,000_____ 1ye
ID: 2690992 • Letter: C
Question
Consider another set of net cash flow Year Cash Flow____ 0 yeasr $2,000_____ 1year 2,000 ____2 yeears 0_____3yeasr 1,500_____ 4years 2,500____ __5years 4,000____________________________________ a. What is the net present value of the stream if the opportunity cost of capital is 10%? __________________________________b. What is the value of the stream at the end of Year 5 if the cash flows are invested in an account that pays 10% annually??________________________________ c. What cash flow today (Year 0), in lieu of the $2,000 cash flow, would be needed to accumulate $20,000 at the end of Year 5?? (Assume that the cash flows for Year 1 through 5 remain the same.)Explanation / Answer
a. NPV= -2000+(2000/1.1)+(1500/1.1^3)+(2500/1.1^4)+(4000/1.1^5)= $5249.07 b. (2000x1.1^5)+(1500x1.1^4)+(2500x1.1^2)+(4000x1.1)=$12842.17