Consider each of the following situations independently.

1. Annual cash inflows from two competing investment opportunities are given below. Each investment opportunity will require the same initial investment. Compute the present value of the cash inflows for each investment using a 20% discount rate:?

2. At the end of four years, when you graduate from college, your parents have promised to give you a used car that will cost $10,000. What Jump sum must they invest now to have the $ 10,000 at the end of four years if they can invest money at?

a. 6%?

b. 12%?

3. Joanne has just won the grand prize on a popular quiz show. She has a choice between (a) receiving $250,000 immediately and (b) receiving $30,000 per year at the end of the year for eight years, plus a lump sum of $100,000 at the end of the eight-year period. If Joanne can get a return of 3% on her investments, which option would you recommend that she accept? Use present value analysis, and show all computations.

4. You have just learned that you are a beneficiary in the will o f your late Uncle Sam. The executor of her estate has given you three options as to how you may receive your inheritance:?

a. You may receive $100,000 immediately.

b. You may receive $ 150,000 at the end of five years.

c. You may receive $24,000 at the end of each year for five years (a total of $120,000). If you can invest money at a 8% return, which option would you prefer?

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Investment Year X Y $ 3,000 6,000 1..... $12,000 2. 9,000 ... 3. ... 6,000 3,000 $30,000 9,000 12,000 $30,000 4.