Part 1:
Draw diagrams of the following cash flow series. Then compute the present value of each series. The interest rate is 6% per year.
Cash flow series A: $300 per year, every year, starting next year and continuing forever.
Cash flow series B: $300 per year, every year, starting in 21 years and continuing forever.
Cash flow series C: $300 per year, every year, starting next year and ending after year twenty.
Part 2:
Draw a diagram of Cash flow series A minus Cash flow series B. Value Additivity guarantees that PV(A-B) = PV(A) - PV(B). What is the present value of the Cash flow series A-B?