1 answer

You are given three investment alternatives to analyze. The cash flows from these three investments as...

Question:

You are given three investment alternatives to analyze. The cash flows from these three investments as followed:

End of the 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 5,000 14,000

What is the present value of Investment A at an annual discount rate of 11 percent?


Answers

Present value=Cash flows*Present value of discounting factor(rate%,time period)

=3000/1.11+4000/1.11^2+5000/1.11^3-6000/1.11^4+6000/1.11^5

which is equal to

=$9213.47(Approx).

.

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