Consider the streams of income given in the following table:
Income Stream
End of Year A B
1 $4,000 $1,000
2 $3,000 $2,000
3 $2,000 $3,000
4 $1,000 $4,000
Total $10,000 $10,000
a. Find the present value of each income stream, using a discount rate of 44%, then repeat those calculations using a discount rate of 8%.
b. Compare the calculated present values and discuss them in light of the fact that the undiscounted total income amounts to $10,000 in each case.