Consider two streams of cash flows, A and B. Stream A's first cash flow is $8,900 and is received three years from today. Future cash flows in stream A grow by 4 percent in perpetuity. Stream B's first cash flow is -$10,000, is received two years from today, and will continue in perpetuity. Assume that the appropriate discount rate is 12 percent.
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What is the present value of each stream?
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Suppose that the two streams are combined into one project, called C. What is the IRR of project C?
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What is the correct IRR rule for project C?