nvestment X offers to pay you $5,100 per year for seven years, whereas Investmen
ID: 2649524 • Letter: N
Question
nvestment X offers to pay you $5,100 per year for seven years, whereas Investment Y offers to pay you $7,200 per year for four years.
Calculate the present value for Investment X and Y if the discount rate is 6 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Calculate the present value for Investment X and Y if the discount rate is 16 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
nvestment X offers to pay you $5,100 per year for seven years, whereas Investment Y offers to pay you $7,200 per year for four years.
Explanation / Answer
Statement showing calculation of Present Value Investment X Investment Y Particulars Time PVF@6% Amount PV Amount PV Cash Inflows 1.00 0.9434 5,100.00 4,811.32 7,200.00 6,792.45 Cash Inflows 2.00 0.8900 5,100.00 4,538.98 7,200.00 6,407.97 Cash Inflows 3.00 0.8396 5,100.00 4,282.06 7,200.00 6,045.26 Cash Inflows 4.00 0.7921 5,100.00 4,039.68 7,200.00 5,703.07 Cash Inflows 5.00 0.7473 5,100.00 3,811.02 - Cash Inflows 6.00 0.7050 5,100.00 3,595.30 - Cash Inflows 7.00 0.6651 5,100.00 3,391.79 - PV of Cash Inflows 5.5824 28,470.15 24,948.76 Time PVF Working Notes 1.00 0.9434 1/1.06 2.00 0.8900 .9434/1.06 3.00 0.8396 .8900/1.06 4.00 0.7921 .8396/1.06 5.00 0.7473 .7921/1.06 6.00 0.7050 .7473/1.06 7.00 0.6651 .7050/1.06 Statement showing calculation of Present Value Investment X Investment Y Particulars Time PVF@16% Amount PV Amount PV Cash Inflows 1.00 0.8621 5,100.00 4,396.55 7,200.00 6,206.90 Cash Inflows 2.00 0.7432 5,100.00 3,790.13 7,200.00 5,350.77 Cash Inflows 3.00 0.6407 5,100.00 3,267.35 7,200.00 4,612.74 Cash Inflows 4.00 0.5523 5,100.00 2,816.68 7,200.00 3,976.50 Cash Inflows 5.00 0.4761 5,100.00 2,428.18 - Cash Inflows 6.00 0.4104 5,100.00 2,093.26 - Cash Inflows 7.00 0.3538 5,100.00 1,804.53 - PV of Cash Inflows 4.0386 20,596.68 20,146.90 Time PVF Working Notes 1.00 0.8621 1/1.16 2.00 0.7432 .8621/1.16 3.00 0.6407 .7432/1.16 4.00 0.5523 .6407/1.16 5.00 0.4761 .5523/1.16 6.00 0.4104 .4761/1.16 7.00 0.3538 .4104/1.16
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