Question

Question 4 Time: 10 minutes Total: 6 marks . . Annual cash inflows from two competing investment opportunities are given below. Each investment opportunity will require the same initial investment. Compute the present value of the cash inflows for each investment using a 7% discount rate. (PLEASE ROUND EACH DISCOUNTED CASH FLOW TO THE NEAREST CENT) Year Investment X Investment Y 1 $2,500 4,000 2 3,000 3,500 3 3,500 3,000 4,000 2,500 Total $13,000 $13,000 4 1. (Total: 6 marks; 3 marks for X and Y each)

Answer 1

Question 4:

Year	Investment X	Investment Y	PV factor @ 7%	Discounted or PV of Cash flows For Investment X	Discounted or PV of Cash flows For Investment X
1	$          2,500	$          4,000	0.9346	$                          2,336	$                           3,738
2	$          3,000	$          3,500	0.8734	$                          2,620	$                           3,057
3	$          3,500	$          3,000	0.8163	$                          2,857	$                           2,449
4	$          4,000	$          2,500	0.7629	$                          3,052	$                           1,907
Total	$       13,000	$       13,000		$                        10,865	$                        11,151