Question
In: Accounting
(Present value of an uneven stream of payments) You are given three investment alternatives to analyze....
(Present
value of an uneven stream of
payments)
You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:
|
Investment |
|||||||||
|
End of Year |
A |
B |
C |
||||||
|
1 |
$ |
1 comma 0001,000 |
$ |
3 comma 0003,000 |
$ |
6 comma 0006,000 |
|||
|
2 |
|
2 comma 0002,000 |
3 comma 0003,000 |
6 comma 0006,000 |
|||||
|
3 |
|
3 comma 0003,000 |
3 comma 0003,000 |
( 6 comma 000 )(6,000) |
|||||
|
4 |
|
( 4 comma 000 )(4,000) |
3 comma 0003,000 |
( 6 comma 000 )(6,000) |
|||||
|
5 |
|
4 comma 0004,000 |
7 comma 0007,000 |
|
16 comma 00016,000 |
||||
What is the present value of each of these three investments if the appropriate discount rate is
1111
percent?
a. What is the present value of investment A at an annual discount rate of
1111
percent?
$nothing
(Round to the nearest cent.)
Solutions
Expert Solution
| Calculation of Present value of each project :- | |||||||
| Project A | Project B | Project C | |||||
| Year | Cash Flows | Present Value @11% | Cash Flows | Present Value @11% | Cash Flows | Present Value @11% | |
| a | b | c = b/1.11^a | d | e = d/1.11^a | f | g = f/1.11^a | |
| 1 | $ 1,000.00 | $ 900.90 | $ 3,000.00 | $ 2,702.70 | $ 6,000.00 | $ 5,405.41 | |
| 2 | $ 2,000.00 | $ 1,623.24 | $ 3,000.00 | $ 2,434.87 | $ 6,000.00 | $ 4,869.73 | |
| 3 | $ 3,000.00 | $ 2,193.57 | $ 3,000.00 | $ 2,193.57 | $ (6,000.00) | $ (4,387.15) | |
| 4 | $ (4,000.00) | $ (2,634.92) | $ 3,000.00 | $ 1,976.19 | $ (6,000.00) | $ (3,952.39) | |
| 5 | $ 4,000.00 | $ 2,373.81 | $ 7,000.00 | $ 4,154.16 | $ 16,000.00 | $ 9,495.22 | |
| Total | Present value | $ 4,456.60 | $ 13,461.50 | $ 11,430.83 | |||
| Present value of investment A at an annual discount rate of 1111 percent? | $ 4,456.60 | ||||||
Feel free to ask any clarification, if required. Kindly
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Thank you.
ekkarill92 answered 1 year agoRelated Solutions
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B
C
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