Investment X offers to pay you $5,000 per year for 9 years, whereas Investment Y

Question

Investment X offers to pay you $5,000 per year for 9 years, whereas Investment Y offers to pay you $7,400 per year for 5 years. f the discount rate is 5 percent, what is the present value of these cash fows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.] Present value Investment X nvestment Y If the discount rate is 15 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Present value Investment X Investment Y

Explanation / Answer

Discount rate - 5% Investment X Investment Y Years 9 5 Anuity factor @ 5% 7.108 4.329 Cash inflows p.a. 5000 7400 Total Present value 35540 32035 Present value Investment X $35,540.00 Investment Y $32,034.60 Discount rate - 15% Investment X Investment Y Years 9 5 Anuity factor @ 15% 4.772 3.352 Cash inflows p.a. 5000 7400 Total Present value 23860 24805 Present value Investment X $23,860.00 Investment Y $24,804.80

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