You are given three investment alternatives to analyze. The cash flow from these

Question

You are given three investment alternatives to analyze. The cash flow from these three investments are as flows.

a. What is the present value of investment A at an annual discount rate of 8%? (round to the nearest cent)

b. What is the present value of investment B at an annual discount rate of 8%? (round to the nearest cent)

c. What is the present value of investment C at an annual discount rate of 8%? (round to the nearest cent)

End of Year A B C 1 $3,000 $2,000 $6,000 2 4,000 2,000 6,000 3 5,000 2,000 -6,000 4 -6,000 2,000 -6,000 5 6,000 6,000 16,000

Explanation / Answer

Answer for subpoint a:

Present value of investment A =$9,849.61.

Answer for subpoint b:

Present value of investment B = $10,707.75.

Answer for Subpoint c:

Present value of investment c =$12,415.75

Year Cash flows (A) Present value factor @8% Present value 1 $3,000.00 0.925925926 $2,777.78 2 $4,000.00 0.85733882 $3,429.36 3 $5,000.00 0.793832241 $3,969.16 4 -$6,000.00 0.735029853 -$4,410.18 5 $6,000.00 0.680583197 $4,083.50 Total $9,849.61

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