nvestment X offers to pay you $3,700 per year for nine years, whereas Investment
ID: 2808492 • Letter: N
Question
nvestment X offers to pay you $3,700 per year for nine years, whereas Investment Y offers to pay you $5,500 per year for five years.
If the discount rate is 6 percent, what is the present value of these cash flows? (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
If the discount rate is 22 percent, what is the present value of these cash flows? (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).)
nvestment X offers to pay you $3,700 per year for nine years, whereas Investment Y offers to pay you $5,500 per year for five years.
Explanation / Answer
1.
a)
Present value of Investment X=3700*((1-(1+6%)^(-9))/6%)=25166.26
Present value of Investment Y=5500*((1-(1+6%)^(-5))/6%)=23168.00
b) Investment X has higher present value
2.
a)
Present value of Investment X=3700*((1-(1+22%)^(-9))/22%)=14009.25
Present value of Investment Y=5500*((1-(1+22%)^(-5))/22%)=15750.02
b) Investment Y has higher present value
the above is answer..
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.