Respuesta :
The net present value of cash flow stream X is 39,169.40; while the net present value of cash flow stream Y is 37,844.83.
How do w calculate net present value?
For the cash flow stream X that is accruing at the beginning of each year, the formula for calculating the present value of an annuity due is used to calculate its net present value as follows:
NPV of X = P * ((1 - (1 / (1 + r))^n) / r) * (1 + r)…………………………………. (1)
Where;
NPV of X = Net present value cash flow stream X = ?
P = Annual cash flow = 9,000
r = interest rate = 15% = 0.15
n = number of years = 6
Substitute the values into equation (1), we have:
NPV of X = 9,000 * ((1 - (1 / (1 + 0.15))^6) / 0.15) * (1 + 0.15)
NPV of X = 39,169.40
For the cash flow stream Y that is accruing at the end of each year, the formula for calculating the present value of an ordinary annuity is used to calculate its present value as follows:
NPV of Y = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (2)
Where;
NPV of Y = Net present value cash flow stream Y = ?
P = Annual cash flow = 10,000
r = interest rate = 15% = 0.15
n = number of years = 6
Substitute the values into equation (2), and we have:
NPV of Y = 10,000 * ((1 - (1 / (1 + 0.15))^6) / 0.15)
NPV of Y = 37,844.83
Learn more about the present value of an ordinary annuity here: https://brainly.com/question/21895696.
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