Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

Exercise 11A-1 Basic Present Value Concepts [LO11-5] Annual cash inflows that wi

ID: 2473412 • Letter: E

Question

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

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

    

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.

    

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).)

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

Explanation / Answer

Investment A Year Cash flow $ Pv@13% PV $ 1           8,000      0.8850     7,079.65 2           9,000      0.7831     7,048.32 3        10,000      0.6931     6,930.50 4        11,000      0.6133     6,746.51 NPV 27,804.97 Investment B Year Cash flow $ Pv@13% PV $ 1        11,000      0.8850     9,734.51 2        10,000      0.7831     7,831.47 3           9,000      0.6931     6,237.45 4           8,000      0.6133     4,906.55 NPV 28,709.98