Question

Annual cash inflows from two competing investment opportunities are given below. Each investment opportunity will require the same initial investment. Compute the present value of the cash inflows for each investment using a 14% discount rate. (PLEASE ROUND EACH DISCOUNTED CASH FLOW TO THE NEAREST DOLLAR)

Year	Investment X	Investment Y
1	$4,500	6,000
2	5,000	5,500
3	5,500	5,000
4	6,000	4,5,00
Total	$21,000	$21,000

1. (Total: 10 marks; 5 marks for X and Y each)

Answer 1

Note : Assuming the factor Values provided upto 3 decimal places. Answers may different if taken 4 or 5 decimal places
Investment X
Year	Annual Cash inflows	PV factor at 14%	Discounted Cash inflow
1	$ 4,500	0.877	$ 3,947
2	$ 5,000	0.770	$ 3,850
3	$ 5,500	0.675	$ 3,713
4	$ 6,000	0.592	$ 3,552
Net Present Value			$ 15,062
Investment Y
Year	Annual Cash inflows	PV factor at 14%	Discounted Cash inflow
1	$ 6,000	0.877	$ 5,262
2	$ 5,500	0.770	$ 4,235
3	$ 5,000	0.675	$ 3,375
4	$ 4,500	0.592	$ 2,664
Net Present Value			$ 15,536