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You are given three investment alternatives with the following cash flows: Investment of 1 2 3 End of Year $5,000 0 $6,000 2
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Answer #1

Present Values at 8 % dicount rate

Present value of Investment 1 :

Present value is arrived by multiplying investment with PV factor.

Year @8% Nm P.v of investment Investment 1 P.V factor 1 5000 0.93 4630 2 6500 0.86 5573 3 0 0 0 4 0 0 01 5 18000 0.68 12250 6

Note: P.V means Present value.

Present value of Inestment 2 :

Present value is arrived by multiplying investment with PV factor.

Year P.v of Investment 2 P.V factor investment @ 8% 1 0 0 0 2 0 0 0 3 0 0 0 4 0 0 0 Сл 15000 0.68 10209 6 26000 0.63 16384 0

Note : P.V means Present value.

Present value of Inestment 3 :

Present value is arrived by multiplying investment with PV factor.

Year P.v of investment Investment 3 P.V factor @8% 1 6000 0.93 5556 2 0 0 01 0 3 0 0 0 4 12000 0.74) 8820 0 Сл 0 0 0 6 0 0 7

Note: P.V means Present value.

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