Question
In: Finance
(Present value of annuities and complex cash flows) You are given three investment alternatives to analyze....
(Present value of annuities and complex cash flows)
You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:
Investment Alternatives:
| 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.
a. What is the present value of investment A at an annual discount rate of 20 percent?
b. What is the present value of investment B at an annual discount rate of 20 percent?
c. What is the present value of investment C at an annual discount rate of 20 percent?
Solutions
Expert Solution
a.Investment A
Net present value is calculated using a financial calculator by inputting the below:
- Press the CF button.
- CF0= 0
- Cash flow for each year should be entered.
- Press Enter and down arrow after inputting each cash flow.
- After entering the tenth cash flow cash flow, press the NPV button and enter the interest rate of 20%.
- Press enter after that. Press the down arrow and CPT buttons to get the net present value.
The present value of investment A is $29,906.12.
b.Investment A
Net present value is calculated using a financial calculator by inputting the below:
- Press the CF button.
- CF0= 0
- Cash flow for each year should be entered.
- Press Enter and down arrow after inputting each cash flow.
- After entering the tenth cash flow cash flow, press the NPV button and enter the interest rate of 20%.
- Press enter after that. Press the down arrow and CPT buttons to get the net present value.
The present value of investment B is $16,0377.38.
c.Investment C
Net present value is calculated using a financial calculator by inputting the below:
- Press the CF button.
- CF0= 0
- Cash flow for each year should be entered.
- Press Enter and down arrow after inputting each cash flow.
- After entering the tenth cash flow cash flow, press the NPV button and enter the interest rate of 20%.
- Press enter after that. Press the down arrow and CPT buttons to get the net present value.
The present value of investment C is $26,693.29.
jeff jeffy answered 1 year agoRelated Solutions
(Related to Checkpoint 6.6) (Present value of annuities and complex cash flows) You are given three...
(Related to Checkpoint 6.6)
(Present value of annuities and complex cash flows)
You are given three investment alternatives to analyze. The cash
flows from these three investments are as follows:
Investment Alternatives
End of Year
A
B
C
1
$
15,000
$
15,000
2
15,000
3
15,000
4
15,000
5
15,000
$
15,000
6
15,000
75,000
7
15,000
8
15,000
9
15,000
10
15,000
15,000
Assuming an annual discount rate of 23 percent, find the
present value of each investment....
(Related to Checkpoint 6.6) (Present value of annuities and complex cash flows) You are given three...
(Related to Checkpoint 6.6)
(Present value of annuities and complex cash flows)
You are given three investment alternatives to analyze. The cash
flows from these three investments are as follows:
Investment Alternatives
End of Year
A
B
C
1
$
16,000
$
16,000
2
16,000
3
16,000
4
16,000
5
16,000
$
16,000
6
16,000
80,000
7
16,000
8
16,000
9
16,000
10
16,000
16,000
Assuming an annual discount rate of 22 percent, find the
present value of each investment....
You are given three investment alternatives to analyze. The cash flows from these three investments are...
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
$
2 comma 0002,000
$
3 comma 0003,000
$
4 comma 0004,000
2
3 comma 0003,000
3 comma 0003,000
4 comma 0004,000
3
4 comma 0004,000
3 comma 0003,000
( 4 comma 000 )(4,000)
4
( 5 comma 000 )(5,000)
3 comma 0003,000
( 4 comma 000 )(4,000)
5
5 comma 0005,000
5 comma...
You are given three investment alternatives to analyze. The cash flows from these three investments are...
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
$
2 comma 0002,000
$
3 comma 0003,000
$
4 comma 0004,000
2
3 comma 0003,000
3 comma 0003,000
4 comma 0004,000
3
4 comma 0004,000
3 comma 0003,000
( 4 comma 000 )(4,000)
4
( 5 comma 000 )(5,000)
3 comma 0003,000
( 4 comma 000 )(4,000)
5
5 comma 0005,000
5 comma...
You are given three investment alternatives to analyze. The cash flows from these three investments are...
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 $3,000 $3,000 $4,000
2 4,000 3,000 4,000
3 5,000 3,000 (4,000)
4 -6,000 3,000 (4,000)
5 6,000 7,000 14,000
What is the present value of each of these three investments if
the appropriate discount rate is 14 percent?
a. What is the present value of investment A at an annual
discount rate of 14 percent?
You are given three investment alternatives to analyze. The cash flows from these three investments are...
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 $1,000 $3,000 $5,000
2 2,000 3,000 5,000
3 3,000 3,000 (5,000)
4 -4,000 3,000 (5,000)
5 4,000 6,000 15,000
What is the present value of each of these three investments if
the appropriate discount rate is 15 percent?
You are given three investment alternatives to analyze. The cash flows from these three investments are...
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
$1,000
$2,000
$6,000
2
2,000
2,000
6,000
3
3,000
2,000
(6,000)
4
(4,000)
2,000
(6,000)
5
4,000
5,000
16,000
What is the present value of each of these three investments if
the appropriate discount rate is 9 percent?
You are given three investment alternatives to analyze. The cash flows from these three investments are...
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 $1,000 $3,000 $5,000
2 2,000 3,000 5,000
3 3,000 3,000 (5,000)
4 -4,000 3,000 (5,000)
5 4,000 7,000 15,000
What is the present value of each of these three investments if
the appropriate discount rate is 13 percent?
(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
$
3,000
$
1,000
$
5,000
2
4,000
1,000
5,000
3
5,000
1,000
(5,000)
4
(6,000)
1,000
(5,000)
5
6,000
4,000
15,000
What is the present value of each of these three investments if
the appropriate discount rate is
15
percent?
a. What is the present...
(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
$
2,000
$
2,000
$
5,000
2
3,000
2,000
5,000
3
4,000
2,000
−5,000
4
(5,000)
2,000
(5,000)
5
5,000
5,000
15,000
What is the present value of each of these three investments if
the appropriate discount rate is
10 percent?
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