Which option is better: receive $160,000 now or $50,000, $25,000, $55,000, $30,000, and $40,000, respectively, over the
Question:
Which option is better: receive $160,000 now or $50,000, $25,000, $55,000, $30,000, and $40,000, respectively, over the next five years? The cash flows are at the end of each year except for $160,000.
Requirements
1. Assuming a 6% interest rate, which investment opportunity would you choose?
2. If you could earn 10%, would your choice change?
3. Assuming a 10% interest rate, what would the cash flow in year 5 have to be in order for you to be indifferent to the two plans?
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Req 1 Amount of Cash Flow 6 Factor from Table Present Value of Cash Flow 50000 943 47150 25000 890 2...View the full answer
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Related Book For 
Financial Accounting
ISBN: 978-0134725987
12th edition
Authors: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
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