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?