Question

Investment X offers to pay you $4,300 per year for nine years, whereas Investment Y offers to pay you $6,000 per year for six years. (Use a Financial calculator to arrive at the answers. Round "PV Factor" to 3 decimal places. Round the final answers to 2 decimal places.) Calculate the present value for Investment X and Y if the discount rate is 4%. Present value Investment X $ Investment Y $ Calculate the present value for Investment X and Y if the discount rate is 14%. Present value Investment X $ Investment Y $

Answer 1

1.Investment X

Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= $0. Since there is no initial cash flow for this question.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter the discount rate of 4%
• Press the down arrow and CPT buttons to get the net present value.  

Net Present value of cash flows at 4% discount rate is $31,971.93.

Investment Y

Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= $0. Since there is no initial cash flow for this question.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter the discount rate of 4%
• Press the down arrow and CPT buttons to get the net present value.  

Net Present value of cash flows at 4% discount rate is $31,452.82.

2.Investment X

Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= $0. Since there is no initial cash flow for this question.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter the discount rate of 14%
• Press the down arrow and CPT buttons to get the net present value.  

Net Present value of cash flows at 14% discount rate is $21,269.40.

Investment Y

Net present value is solved using a financial calculator. The steps to solve on the financial calculator:

• Press the CF button.
• CF0= $0. Since there is no initial cash flow for this question.
• Cash flow for all the years should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow, press the NPV button and enter the discount rate of 14%
• Press the down arrow and CPT buttons to get the net present value.  

Net Present value of cash flows at 14% discount rate is $23,332.

In case of any query, kindly comment on the solution.