You are given three investment alternatives to analyze. The cash flows from thes

Question

You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: What is the present value of each of these three investments if the appropriate discount rate is 15 percent? What is the present value of investment A at an annual discount rate of 15 percent? (Round to the nearest cent.) What is the present value of investment B at an annual discount rate of 15 percent? (Round to the nearest cent.) What is the present value of investment C at an annual discount rate of 15 percent? (Round to the nearest cent.)

Explanation / Answer

1.Calculation of present value of Investments in A @15% :       

      Present value of investment in A at 15% discount rate is $8470

2)Calculation of present value of investment in B @15% :

       Present value of investment in B at discount rate 15% is $7698

3) Calculation of present value Investments in C @15% :

   Present value of investment in C at discount rate 15% is $8546

Year Cash flow Pv fator@15% Present value 1 3000 0.870 2610 2 4000 0.756 3024 3 5000 0.657 3285 4 (6000) 0.572 (3432) 5 6000 0.497 2983 8470

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