Exercise 11A-1 Basic Present Value Concepts [LO11-5]

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

Year	Investment A	Investment B
1	$ 8,000	$11,000
2	9,000	10,000
3	10,000	9,000
4	11,000	8,000
Total	$38,000	$38,000

The discount rate is 13%.

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Required:

Compute the present value of the cash inflows for each investment. Each investment opportunity will require the same initial investment. (Use the appropriate table to determine the discount factor(s).)

Amount of Cash Flows 13% Factor Present Value of Cash Flows

A B A B