An unavoidable cost may be met by outlays of $15,000 now and $2,000 at the end of
Question:
An unavoidable cost may be met by outlays of $15,000 now and $2,000 at the end of every six months for two years(Alternative 1) or by making monthly payments of $420 for six years(Alternative 2). Interest is 12% compounded annually. Compute the present value of each alternative and determine the preferred alternative according to the discounted cash flow criterion.
The present value of Alternative 1 is $_____
.
(Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places asneeded.)
The present value of Alternative 2 is $_____
.
(Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places asneeded.)
The preferred alternative is
Alternative 1.
Alternative 2.