Question
In: Finance
(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 |
6 comma 0006,000 |
|
16 comma 00016,000 |
||||
What is the present value of each of these three investments if the appropriate discount rate is
99
percent?
a. What is the present value of investment A at an annual discount rate of
99
percent?
Solutions
Expert Solution
Project A
Net present value can also be 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 each year should be entered.
- Press Enter and down arrow after inputting each cash flow.
- After entering the last cash flow cash flow, press the NPV button and enter the discount rate.
- Press enter after that. Press the down arrow and CPT buttons to get the net present value.
Net present value at 9% discount rate is $4,683.37.
Project B
Net present value can also be 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 each year should be entered.
- Press Enter and down arrow after inputting each cash flow.
- After entering the last cash flow cash flow, press the NPV button and enter the discount rate.
- Press enter after that. Press the down arrow and CPT buttons to get the net present value.
Net present value at 9% discount rate is $13,618.75.
Project C
Net present value can also be 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 each year should be entered.
- Press Enter and down arrow after inputting each cash flow.
- After entering the last cash flow cash flow, press the NPV button and enter the discount rate.
- Press enter after that. Press the down arrow and CPT buttons to get the net present value.
Net present value at 9% discount rate is $12,069.92.
In case of any query, kindly comment on the solution.
jeff jeffy answered 1 year agoRelated Solutions
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(Present
value of an uneven stream of
payments)
You are given three investment alternatives to analyze. The cash
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Investment
End of Year
A
B
C
1
$
3,000
$
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(Present value of an uneven stream of payments) You are given three investment alternatives to analyze....
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