Which method is better for a long series of cash flows

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Reference no: EM131334578

Use the following table of cash flows to answer parts (a)-(c). Assume an 8 percent discount rate.

End of Year	Cash Flow
1	$ 10,000
2	10,000
3	10,000
4	12,000
5	12,000
6	12,000
7	12,000
8	15,000
9	15,000
10	15,000

a. Solve for the present value of the cash flow stream by summing the present value of each individual cash flow.

b. Solve for the present value by summing the present value of the three separate annuities (one current and two deferred).

c. Which method is better for a long series of cash flows with embedded annuities?

Reference no: EM131334578

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