Assume that the interest rate is greater than zero. Which of the following cash in flow streams totaling $1500 would you prefer? The cash flows are listed on order for year 1 year 2 and year 3 respectively A. $700;$500;$300 B. Any OF the above since they all sum to $1500 C. $300;$500;$700 D. $500;$500;$500
Added by Shan J.
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This is why we prefer to receive money now rather than later. This concept is known as the time value of money. Given this, we would prefer to receive larger amounts earlier. So, among the options given, we would prefer option A ($700 in year 1, $500 in year 2, Show more…
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