Question

Graded Problems Saved Help Annual cash inflows from two competing Investment opportunities are given below. Each investment opportunity will require the same initial investment. Investment Investment Year 1 Year 2 Year 3 Year 4 $3,000 4,000 5 ,000 6,000 $6,000 5,000 4,000 3,000 Total $18,000 $18,000 Click here to view Exhibit 118-1, to determine the appropriate discount factor(s) using tables Required: Compute the present value of the cash inflows for each investment using a 8% discount rate. (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.) Present Value of Cash Flows Investment X Investment Y < Prey 2 of 9 !!! Next > Spotify

Answer 1

Solution

	Present value of cash flows
Investment X	$        14,586
Investment Y	$        15,222

Working

Year	Investment X cash flows (A)	Investment Y cash flows (B)	PV factor @8% (c )	Present value of cash flows Investment X (A x C)	Present value of cash flows Investment Y (B x C)
1	$          3,000	$          6,000	0.926	$       2,778	$        5,556
2	$          4,000	$          5,000	0.857	$       3,428	$        4,285
3	$          5,000	$          4,000	0.794	$       3,970	$        3,176
4	$          6,000	$          3,000	0.735	$       4,410	$        2,205
Total Present value of cash flows				$     14,586	$     15,222