Appendix B

Appendix D

A firm must choose between two investment alternatives, each costing $105,000. The first alternative generates $35,000 a year for four years. The second pays one large lump sum of $154,600 at the end of the fourth year. If the firm can raise the required funds to make the investment at an annual cost of 9 percent, what are the present values of two investment alternatives? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar. PV(Firstalternative):$PV(Secondalternative):$ Which alternative should be preferred? The alternative should be preferred. Interest Factors for the Present Value of One Dollar \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline TimePeriod(ers.year) & & 26 & 3% & 40 & 5% & 6% & 78 & 8% & 9% & 10% & 12% & 14% & 15N & 16% & 18% & 20% & 246 & 236 \\ \hline 1 & 990 & 980 & 971 & 962 & 952 & 943 & .935 & 926 & 917 & .909 & .893 & 877 & .870 & .862 & .847 & .833 & 806 & 781 \\ \hline 2 & 980 & .961 & 943 & 925 & 907 & .890 & 873 & .857 & 842 & .826 & .797 & 769 & 756 & 743 & 718 & .694 & .650 & .610 \\ \hline 3 & 971 & 942 & .915 & .889 & .864 & 840 & 816 & 794 & 772 & .751 & 712 & .675 & .658 & .641 & .609 & .579 & 524 & 477 \\ \hline 4 & 961 & 924 & 889 & 855 & 823 & .792 & .763 & .735 & 708 & .683 & .636 & 592 & 572 & .552 & 516 & 482 & .423 & 373 \\ \hline 5 & 951 & 906 & .863 & .822 & 784 & .747 & 713 & 681 & .650 & .621 & .567 & 519 & .497 & .476 & 437 & 402 & 341 & 291 \\ \hline 6 & 942 & .888 & .838 & .790 & .746 & .705 & .666 & .630 & 596 & 564 & .507 & 456 & .432 & .410 & 370 & .335 & 275 & 227 \\ \hline 7 & 933 & 871 & .813 & .760 & .711 & .665 & .623 & 583 & 547 & 513 & .452 & .400 & 376 & 354 & 314 & 279 & 222 & .178 \\ \hline 8 & 923 & .853 & 789 & .731 & 677 & .627 & 582 & .540 & 502 & 467 & 404 & 351 & 327 & 305 & 266 & 233 & 179 & .139 \\ \hline 9 & 914 & 837 & .766 & .703 & .645 & 592 & 544 & .500 & 460 & 424 & 361 & 308 & 284 & 263 & .226 & .194 & .144 & .108 \\ \hline 10 & 905 & 820 & .744 & .676 & .614 & 558 & 508 & .463 & .422 & 386 & 322 & 270 & 247 & 227 & .191 & 162 & .116 & .085 \\ \hline 11 & .896 & 804 & .722 & .650 & .585 & 527 & .475 & .429 & 388 & 350 & .287 & .237 & 215 & .195 & .162 & .135 & .094 & .066 \\ \hline 12 & .887 & .788 & 701 & .625 & 557 & .497 & .444 & .397 & 356 & 319 & 257 & 208 & 187 & .168 & .137 & .112 & .076 & .052 \\ \hline 13 & 879 & 773 & 681 & .601 & 530 & .469 & 415 & 368 & 326 & 290 & 229 & 182 & .163 & .145 & 116 & .093 & .061 & .040 \\ \hline 14 & 870 & .758 & .661 & .577 & .505 & .442 & 388 & 340 & 299 & 263 & 205 & .160 & .141 & .125 & 099 & .078 & .049 & .032 \\ \hline 15 & .861 & .743 & .642 & .555 & .481 & .417 & .362 & 315 & .275 & 239 & .183 & .140 & .123 & .108 & 084 & .065 & .040 & .025 \\ \hline 16 & .853 & 728 & .623 & .534 & .458 & 394 & 339 & .292 & .252 & .218 & .163 & .123 & .107 & .093 & .071 & .054 & .032 & .019 \\ \hline 17 & 844 & 714 & .605 & 513 & 436 & 371 & 317 & 270 & 231 & .198 & .146 & .108 & .093 & .080 & .060 & .045 & .026 & .015 \\ \hline 18 & 836 & 700 & 587 & 494 & 416 & 350 & .296 & .250 & 212 & .180 & .130 & .095 & .081 & .069 & .051 & .038 & .021 & 012 \\ \hline 19 & 828 & .686 & 570 & .475 & 396 & 331 & 276 & 232 & 194 & .164 & 116 & .083 & .070 & .060 & .043 & 031 & 017 & .009 \\ \hline 20 & .820 & .673 & .554 & .456 & .377 & .312 & .258 & .215 & .178 & .149 & .104 & .073 & .061 & .051 & .037 & .026 & .014 & .007 \\ \hline 25 & 780 & .610 & .478 & 375 & .295 & .233 & .184 & .146 & .116 & .092 & .059 & .038 & .030 & .024 & .016 & .010 & .005 & .002 \\ \hline 30 & 742 & 552 & .412 & 308 & 231 & .174 & .131 & .099 & .075 & .057 & .033 & .020 & .015 & .012 & .007 & .004 & .002 & .001 \\ \hline \end{tabular} Interest Fantars for the Present Value of an Annuitv of One Dollar