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Unformatted text preview: ou 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 a 9% 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 $700 $1,100 2 700 900 3 700 700 4 700 500 5 700 300 Single amount
At time zero LG6 ST 4–4 $2,825 $2,800 Deposits needed to accumulate a future sum Judi Janson wishes to accumulate
$8,000 by the end of 5 years by making equal annual end-of-year deposits over
the next 5 years. If Judi can earn 7% on her investments, how much must she
deposit at the end of each year to meet this goal? 172 PART 2 Important Financial Concepts PROBLEMS
LG1 4–1 Using a time line The financial manager at Starbuck Industries is considering...
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