Consider another set of net cash flows:Year Cash Flow
0 $ 0
1 250
2 400
3 500
4 600
5 600
Year Cash Flow
0 $2,000
1 2,000
2 0
3 1,500
4 2,500
5 4,000
a. What is the net present value of the stream if the opportunity cost of capital is
10 percent?
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 percent 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
Years 1 through 5 remain the same.)