Given the mixed streams of cash flows shown in the following table, answer parts (a) and (b):
|
Year
|
Cash Flow Stream
|
|
A
|
B
|
|
1
|
$ 50,000
|
$ 10,000
|
|
2
|
40,000
|
20,000
|
|
3
|
30,000
|
30,000
|
|
4
|
20,000
|
40,000
|
|
5
|
10,000
|
50,000
|
|
Totals
|
$ 150,000
|
$ 150,000
|
a. Find the present value of each stream, using a 15 percent discount rate.
b. Compare the calculated present values, and discuss them in light of the fact that the undiscounted total cash flows amount to $150,000 in each case.