When finding the present value (PV) of any cash flow stream, what does CF represent? Group of answer choices future value number of payment periods cash flow to be received in that period interest rate
Added by Brandon W.
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Step 1: Recall the present value formula uses CF_t to denote the cash flow at period t in the stream. Show more…
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The NPV (net present value) of a cash stream that is equal to $100 per period for 5 periods with a rate of return of 12% per period would be: (hint: the first cash flow starts in year 1) $360.48. $382.98. $403.73. $416.51.
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Which of the following series represents constant cash flows that occur at the end of each period for some fixed number of periods? Ordinary Annuity Annuity Due None of the above Perpetuity
Jennifer S.
Many financial decisions require the analysis of uneven or nonconstant cash flows. Stock dividends typically increase over time, and investments in capital equipment almost always generate uneven cash flows. The term cash flow (CFt) denotes cash flows, while payment (PMT) designates cash flows coming at regular intervals. The present value of an uneven cash flow stream is the sum of the PVs of the individual cash flows. The equation is: PV = ∑(CFt / (1+r)^t). Similarly, the future value of an uneven cash flow stream is the sum of the FVs of the individual cash flows. Many calculators have an NFV key that lets you obtain the FV. However, if your calculator doesn't have a net future value (NFV) key, you can calculate the NFV as follows: NFV = NPV × (1+r)^n. One can also find the interest rate of the uneven cash flow stream with a financial calculator by solving for r in the equation: NPV = ∑(CFt / (1+r)^t). Quantitative Problem: You own a security with the cash flows shown below: $700, $355, $240, $320. If you require an annual return of 10%, what is the present value of this cash flow stream? Round your answer to the nearest cent. Do not round intermediate calculations.
Manasvee S.
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Horngren’s Cost Accounting
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Principles of Accounting Volume 1: Financial Accounting
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