Question
You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Annual cash inflows that will arise from
You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:
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 |
Total | $30,000 | $30,000 |
The discount rate is 18%.
Required:
Compute the present value of the cash inflows for each investment.
What is the present value of each of these three investments if the appropriate discount rate is
15 percent? Question content area bottom Part 1
a. What is the present value of investment A at an annual discount rate of 15 percent?
Step by Step Solution
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Step: 1
Answer PV CF1 1 r CF2 1 r CFn 1 rn where PV Present value CF Cash flow in each ye...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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