Which form cash flow stream or lump-sum amount preferred

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Reference no: EM13256757

You have a choice of accepting either of two 5-year cash flow streams or lump-sum amounts. One cash flow stream is an annuity, and the other is a mixed stream. You accept alternative X or Y, either as a cash flow stream or as a lump-sum. Given the cash flow stream and lump-sum amounts associated with each, and assuming a 9 percent opportunity cost, which alternative (X or Y) and in which form (cash flow stream or lump-sum amount) would you prefer?

Cash Flow stream
End of year	Alternative X	Alternative Y
1	Rs. 700	Rs. 1,100
2	700	900
3	700	700
4	700	500
5	700	300
Lump-sum amount
At time zero	Rs. 2,825	Rs. 2,800

Reference no: EM13256757

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