Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. (present value of an uneven stream of payments?) y

(Present value of an uneven stream of payments?) You are given three investment alternatives to analyze. The cash flows...

Free

70.2K

Verified Solution

Question

Finance

(Present

value of an uneven stream of

payments?)

You are given three investment alternatives to analyze. The cashflows from these three investments are as? follows:

Investment

End of Year

????A

????B

????C

1

?$

3,000??

?$

3,000

?$

6,000??

2

??

4,000??

3,000

6,000??

3

??

5,000??

3,000

(6,000)

4

??

(6,000)

3,000

(6,000)

5

??

6,000??

5,000

??

16,000??

What is the present value of each of these three investments ifthe appropriate discount rate is

8

?percent?

a.??What is the present value of investment A at an annualdiscount rate of

8

?percent?

Answer & Explanation Solved by verified expert
3.9 Ratings (342 Votes)

A
Discount rate 0.08
Year 0 1 2 3 4 5
Cash flow stream 0 3000 4000 5000 -6000 6000
Discounting factor 1 1.08 1.1664 1.259712 1.360489 1.469328
Discounted cash flows project 0 2777.778 3429.355 3969.161 -4410.179 4083.499
NPV = Sum of discounted cash flows
NPV A = 9849.61
Where
Discounting factor = (1 + discount rate)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor
B
Discount rate 0.08
Year 0 1 2 3 4 5
Cash flow stream 0 3000 3000 3000 3000 5000
Discounting factor 1 1.08 1.1664 1.259712 1.360489 1.469328
Discounted cash flows project 0 2777.778 2572.016 2381.497 2205.0896 3402.916
NPV = Sum of discounted cash flows
NPV B = 13339.3
Where
Discounting factor = (1 + discount rate)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor
C
Discount rate 0.08
Year 0.00% 1 2 3 4 5
Cash flow stream 0 6000 6000 -6000 -6000 16000
Discounting factor 1 1.08 1.1664 1.259712 1.360489 1.469328
Discounted cash flows project 0 5555.556 5144.033 -4762.99 -4410.179 10889.33
NPV = Sum of discounted cash flows
NPV C = 12415.75
Where
Discounting factor = (1 + discount rate)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

(Presentvalue of an uneven stream ofpayments?)You are given three investment alternatives to analyze. The cashflows from these three investments are as? follows:InvestmentEnd of Year????A????B????C1?$3,000???$3,000?$6,000??2??4,000??3,0006,000??3??5,000??3,000(6,000)4??(6,000)3,000(6,000)5??6,000??5,000??16,000??What is the present value of each of these three investments ifthe appropriate discount rate is8?percent?a.??What is the present value of investment A at an annualdiscount rate of8?percent?

Other questions asked by students

Q

How is a coniferophyta megagametophyta different from a magnoliophyta megagametophyta?

Biology
Q

The following questions are for fedex: What political/legal forces affect the industry? What economic forces affect...

General Management
Q

57 60 Use a graphing device to graph the polar curve Choose the parameter interval...

Calculus
Q

Exercise 5-12(Algo) Equivalent Units; Assigning Costs; Cost Reconciliation-Weighted-Average Method ...

Accounting
Q

The adjusted trial balance for Tybalt Construction on December 31 of the current year follows....

Accounting
Q

Sheridan Manufacturing produces towels to be sold as souvenirs at sporting events throughout the world....

Accounting
Q

Korvanis Corporation operates a Medical Services Department for its employees. Charges to the company's operating...

Accounting
Q

Eliezrie, Incorporated, manufactures and sells two products: Product G8 and Product O0. Data concerning the...

Accounting
Q

Amarillo Corporation has four divisions: the assembly division, the processing division, the machining division, and...

Accounting
Q

Where should a client initiate the setup of Quickbooks payments?

Accounting
Q

I. Consider the following three government bonds: Bond Bond Price Coupon Rate Maturity X $1,034.98...

Finance
Q

In April, Grinnel Paving, Inc. acquired a large quantity of crushed stone on account with...

Accounting