Question

b. You have a choice of accepting either of two 5-year cash flow streams or single amounts. One cash flow stream is an ordinary annuity, and the other is a mixed stream. You may accept alternative A or B—either as a cash flow stream or as a single amount. Given the cash flow stream and single amounts associated with each (see the accompanying table), and assuming 8% opportunity cost, which alternative (A or B) and in which form (cash flow stream or single amount) would you prefer? | | Cash flow stream | | | :--- | :--- | :--- | | End of year | Alternative A | Alternative B | | 1 | BDT 70000 | BDT 1,10,000 | | 2 | BDT 70000 | BDT 90,000 | | 3 | BDT 70000 | BDT 70,000 | | 4 | BDT 70000 | BDT 50,000 | | 5 | BDT 70000 | BDT 30,000 | | | Single amount | Single amount | | At time zero | BDT 2,82,500 | BDT 2,80,000 |

          b. You have a choice of accepting either of two 5-year cash flow streams or single amounts. One cash flow stream is an ordinary annuity, and the other is a mixed stream. You may accept alternative A or B—either as a cash flow stream or as a single amount. Given the cash flow stream and single amounts associated with each (see the accompanying table), and assuming 8% opportunity cost, which alternative (A or B) and in which form (cash flow stream or single amount) would you prefer?

| | Cash flow stream | |
| :--- | :--- | :--- |
| End of year | Alternative A | Alternative B |
| 1 | BDT 70000 | BDT 1,10,000 |
| 2 | BDT 70000 | BDT 90,000 |
| 3 | BDT 70000 | BDT 70,000 |
| 4 | BDT 70000 | BDT 50,000 |
| 5 | BDT 70000 | BDT 30,000 |
| | Single amount | Single amount |
| At time zero | BDT 2,82,500 | BDT 2,80,000 |

b. You have a choice of accepting either of two 5-year cash flow streams or single amounts. One cash flow stream is an ordinary annuity, and the other is a mixed stream. You may accept alternative A or B—either as a cash flow stream or as a single amount. Given the cash flow stream and single amounts associated with each (see the accompanying table), and assuming 8% opportunity cost, which alternative (A or B) and in which form (cash flow stream or single amount) would you prefer?

| | Cash flow stream | |
| :— | :— | :— |
| End of year | Alternative A | Alternative B |
| 1 | BDT 70000 | BDT 1,10,000 |
| 2 | BDT 70000 | BDT 90,000 |
| 3 | BDT 70000 | BDT 70,000 |
| 4 | BDT 70000 | BDT 50,000 |
| 5 | BDT 70000 | BDT 30,000 |
| | Single amount | Single amount |
| At time zero | BDT 2,82,500 | BDT 2,80,000 |

Added by Roberto D.

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