(Present value of an uneven stream of paymentsâ) You are given three investment alternatives to analyze. The cash flows from these three investments are asâ follows:
End_of_Year A B C
1 $2,000 $1,000 $4,000
2 3,000 1,000 4,000
3 4,000 1,000 (4,000)
4 -5,000 1,000 (4,000)
5 5,000 3,000 14,000
a. What is the present value of investment A at an annual discount rate of 9 âpercent?
b.âWhat is the present value of investment B at an annual discount rate of 9 âpercent?
c. What is the present value of investment C at an annual discount rate of 9 âpercent?
(Present value of an uneven stream of paymentsâ) You are given three investment alternatives to analyze. The cash flows from these three investments are asâ follows:
End_of_Year A B C
1 $2,000 $1,000 $4,000
2 3,000 1,000 4,000
3 4,000 1,000 (4,000)
4 -5,000 1,000 (4,000)
5 5,000 3,000 14,000
a. What is the present value of investment A at an annual discount rate of 9 âpercent?
b.âWhat is the present value of investment B at an annual discount rate of 9 âpercent?
c. What is the present value of investment C at an annual discount rate of 9 âpercent?
Related questions
| Consider the following uneven cash flow stream: | ||||||||
| Year | Cash Flow | |||||||
| 0 | $0 | |||||||
| 1 | $400 | |||||||
| 2 | $500 | |||||||
| 3 | $750 | |||||||
| 4 | $850 | |||||||
| 5 | $1,000 | |||||||
| a. What is the present (Year 0) value if the opportunity cost (discount) rate is 9 percent? | ||||||||
| b. Add an ouflow (or cost) of $2,000 at Year 0. What is the present value (or net present value) of the | ||||||||
| stream? | ||||||||
Mikkelson Corp makes an investment of $14,400 that provides the following cash flow:
| Year | Cash Flow |
| 1................ | $ 7,000 |
| 2................ | 7,000 |
| 3................ | 4,000 |
a. What is the net present value at an 11 percent discount rate?
b. What is the internal rate of return? Use the interpolation procedure.
c. In this problem would you make the same decision under both parts a and b?
