Question

P4A.17 (similar to) Question Help Terri Allessandro has an opportunity to make any of the following investments: . The purchase price, the lump-sum future value, and the year of receipt are given below for each investment. Terri can earn a rate of return of 11% on investments similar to those currently under consideration. Evaluate each investment to determine whether it is satisfactory, and make an investment recommendation to Terri. The present value, PV, at 11% required return of the income from Investment A is $ (Round to the nearest cent.)

Answer 1

The present values are as under

Investment	Purchase price	FV	Year of receipts	PV
A	10741	21000	6	$11,227.46
B	455	3000	21	$335.23
C	2774	11000	12	$3,144.25
D	792	14000	38	$265.37

Investment A and C are good since the purchase price is lesser than the present value of amounts receivable from them.

Investment B and D are overpriced and should not be bought.

Workings

Book1 - Excel Sign in File Home Insert Page Layout Formulas Data Review View Help Il me what you want to do = = der alten General Insert * Delete Format - Calibri 11 A À BI U - - Ø - A - Font col Paste Conditional Format as Cell Formatting Table Styles Styles Sort & Filter Editing Clipboard Alignment Number Cells D7 G E Year of receipts Investment FV Purchase price 10741 455 2774 792 21 21000 3000 11000 14000 PV =PV(11%,E2,,-D2) =PV(11%,E3,,-D3) =PV(11%,E4,,-D4) =PV(11%,E5,,-05) 12 38