Question

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	10,000		10,000
2	10,000
3	10,000
4	10,000
5	10,000	10,000
6		10,000	50,000
7		10,000
8		10,000
9		10,000
10		10,000	10,000

Assuming an annual discount rate of 20 ​percent, find the present value of each investment.

Answer 1

					Statement Computing Present values		In $
Year	Investment A	Investment B	Investment C	Discounting factor @20%	Discounted Values Investment A	Discounted Values Investment B	Discounted Values Investment C
1	10000.00	0.00	10000.00	0.833	8333.33	0.00	8333.33
2	10000.00	0.00	0.00	0.694	6944.44	0.00	0.00
3	10000.00	0.00	0.00	0.579	5787.04	0.00	0.00
4	10000.00	0.00	0.00	0.482	4822.53	0.00	0.00
5	10000.00	10000.00	0.00	0.402	4018.78	4018.78	0.00
6	0.00	10000.00	50000.00	0.335	0.00	3348.98	16744.90
7	0.00	10000.00	0.00	0.279	0.00	2790.82	0.00
8	0.00	10000.00	0.00	0.233	0.00	2325.68	0.00
9	0.00	10000.00	0.00	0.194	0.00	1938.07	0.00
10	0.00	10000.00	10000.00	0.162	0.00	1615.06	1615.06
				Present values	29906.12	16037.38	26693.29