Investments A and B have the net cash flows given below. End of year 1 2...
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Investments A and B have the net cash flows given below. End of year 1 2 4 A $250 $75 $75 $75 $150 -$250 $150 $150 $75 $75 Compare the present worth of A with the present worth of B for an interest rate of 5%. Which has the higher value?Answer:A vii) If the interest rate is 15%, which has the higher value?Answer:B i) i) What is the rate of return for each cash flow? ii) iv) On the same axis, graph the present worth of each investment as a function of the interest rate. FWA and PWA AEA v) At the rate of 10%, calculate the given ratios and compare them. PWB' AEB FWB What important observation can be made from this comparison? Investments A and B have the net cash flows given below. End of year 1 2 4 A $250 $75 $75 $75 $150 -$250 $150 $150 $75 $75 Compare the present worth of A with the present worth of B for an interest rate of 5%. Which has the higher value?Answer:A vii) If the interest rate is 15%, which has the higher value?Answer:B i) i) What is the rate of return for each cash flow? ii) iv) On the same axis, graph the present worth of each investment as a function of the interest rate. FWA and PWA AEA v) At the rate of 10%, calculate the given ratios and compare them. PWB' AEB FWB What important observation can be made from this comparison?
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Answer rating: 100% (QA)
Answer By trial error method RORI 150 75 475 B 150 I1I2 50 7s 150 2500150 14i 25 0 ... View the full answer
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