You are scheduled to receive annual payments of $9,600 for each of the next 24 years....

You are scheduled to receive annual payments of $9,600 for each of the next 24 years. The discount rate is 8.0 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of each year?

$9,600.00

$10,368.00

$8,554.57

$9,279.36

$8,086.09

Expert Solution

Since payback period is higher than required therefore project should be rejected

Correct answer is option = Reject

present value if payment received at the end

We have to use financial calculator to solve this
put in calculator

FV		0
PMT		-9600
I		8%
N		24

compute PV	$101,076.08



present value if payment received at the Beginning

We have to use financial calculator to solve this
put in calculator, set the calculator at BEGIN mode

FV		0
PMT		-9600
I		8%
N		24

compute PV	$109,162.17


Difference in value =	$8,086.09
109162.17-101076.08

answer =		$8,086.09

jeff jeffy answered 1 year ago

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