ch.6 question 2QP is wrong could you please redo it. the answer in the book show
ID: 2669474 • Letter: C
Question
ch.6 question 2QP is wrong could you please redo it. the answer in the book shows @5%: PVx=$42,646.93 PVy= $40,605.54
@ 15%: PVx= $28,629.50 PVy=$30,275.86
Could you please show how they got these answers?
2. Present Value and Multiple Cash Flows [LO1] Investment X offers to pay you $6,000 per year for nine years, whereas Investment Y offers to pay you $8,000 per year for six years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 15 percent?
Explanation / Answer
The book is actually wrong. They utilized the discount rate as the interest rate to get those answers. 6000 PMT 0 FV 5 I/Y 9 N CPT PV = 42646.93 8000 PMT 0 FV 5 I/Y 6 N CPT PV = 40605.54 6000 PMT 0 FV 15 I/Y 9 N CPT PV = 28629.50 8000 PMT 0 FV 15 I/Y 6 N CPT PV = 30275.86 But like I said, the book is wrong. The book should have calculated interest using the discount rate first. i = d/(1-d) So at 5% discount, interest is actually 5.263%, and at 15% discount, interest should be 17.65%, and those figures should be used in the calculations.
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