What is the present value of the following uneven cash flow stream: 0 dollars at Time 0, 100 dollars in Year 1, 200 dollars in Year 2, 0 dollars in Year 3, and 400 dollars in Year 4, if the interest rate is 8 percent?
Explanation
To find the present value of an uneven cash flow stream, each individual cash flow must be discounted back to the present at the appropriate interest rate, and then these present values are summed.
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