Answer:
Present value Discount rate 7% Discount rate 0%
Cash stream A $1,217.11 $1,500
Cash stream B $1,239.27 $1,500
Explanation:
Since there is two cash stream i.e A and B and we have to find out the present value of each cash stream through a discount rate of 7% and 0%
The workings are shown in the attached spreadsheet
Plus the discount factor is computed by
= 1 ÷ (1 + rate) ^ years
For Year 1 = 1 ÷ 1.07^1 = 0.9345794393
For Year 2 = 1 ÷ 1.07^2 = 0.8734387283
and so on
