EXERCISE 12A–2 Basic Present Value Concepts [LO5]

Annual cash inflows that will arise from two competing investment projects are given below:

Year Investment A Investment B 1 ..................... $ 3,000 $12,000 2 ..................... 6,000 9,000 3 ..................... 9,000 6,000 4 ..................... 12,000 3,000

$30,000 $30,000 The discount rate is 18%.

Required:

Compute the present value of the cash inflows for each investment.