Question

# You are given three investment alternatives to analyze. The cash flows from these three investments are...

You are given three investment alternatives to analyze. The cash flows from these three investments are as​ follows:

 End of Year A B C 1 \$3,000 \$1,000 \$4,000 2 4000 1000 4000 3 5000 1000 (4,000) 4 -6000 1000 (4,000) 5 6000 4000 14000

a. What is the present value of investment A at an annual discount rate of 9 ​percent? ​\$____​(Round to the nearest​ cent.)

b. What is the present value of investment B at an annual discount rate of 9 ​percent? ​\$____​(Round to the nearest​ cent.)

c. What is the present value of investment C at an annual discount rate of 9 ​percent? ​\$____​(Round to the nearest​ cent.)

a)

The Present value factor is calculated as 1/(1.09)^n , where n is the year

For investment A

 Year Cash Flow Pv Factor @9% Cash flow * PV factor 1 3000 0.917 2752.294 2 4000 0.842 3366.720 3 5000 0.772 3860.917 4 -6000 0.708 -4250.551 5 6000 0.650 3899.588 Total = 9628.968

Present value = \$ 9628.97

b)

For investment B

 Year Cash Flow Pv Factor @9% Cash flow * PV factor 1 1000 0.917 917.431 2 1000 0.842 841.680 3 1000 0.772 772.183 4 1000 0.708 708.425 5 4000 0.650 2599.726 Total = 5839.445

Present value = \$ 5839.45

c)

For investment C

 Year Cash Flow Pv Factor @9% Cash flow * PV factor 1 4000 0.917 3669.725 2 4000 0.842 3366.720 3 -4000 0.772 -3088.734 4 -4000 0.708 -2833.701 5 14000 0.650 9099.039 Total = 10213.049

Present value = \$ 10213.05

#### Earn Coins

Coins can be redeemed for fabulous gifts.