Principles of Managerial Finance

CHAPTER 4 Time Value of Money 175

TABLE 4.4 Present Value of a Mixed

Stream of Cash Flows

Present value

Cash flow PVIF9%,na [(1)(2)]

Year (n) (1) (2) (3)

1 $400 0.917 $ 366.80

2 800 0.842 673.60

3 500 0.772 386.00

4 400 0.708 283.20

5 300 0.650  (^1)  (^9)  (^5) . (^0)  (^0) 
Present value of mixed stream $

1

,

9

0

4

.

6

0

aPresent value interest factors at 9% are from Table A–2.
table factors, the present value of Frey Company’s cash flow stream found using
a calculator is $1,904.76, which is close to the $1,904.60 value calculated before.
Spreadsheet Use The present value of the mixed stream of future cash flows
also can be calculated as shown on the following Excel spreadsheet.
Paying about $1,905 would provide exactly a 9% return. Frey should pay no
more than that amount for the opportunity to receive these cash flows.
Review Question
4–13 How is the future value of a mixed stream of cash flows calculated? How
is the present value of a mixed stream of cash flows calculated?