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Using the information provided in the following table, find the value of each asset. Cash flow Asset end of...

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Finance

Using the information provided in the following table, find thevalue of each asset.

Cash flow

Asset

end of year

Amount

Appropriate required return

A

1

$6,000

13%

2

6,000

3

6,000

B

1 through ∞

$200

10%

C

1

$0

12%

2

$0

3

$0

4

$0

5

35,000

D

1 through 5

$2,500

12%

6

8,500

E

1

$3,000

19%

2

2,000

3

8,000

4

7,000

5

4,000

6

1,000

Answer & Explanation Solved by verified expert
4.1 Ratings (724 Votes)

13.00%
Cash flows Year Discounted CF
                           -   0 0.00
              6,000.00 1 5309.73
              6,000.00 2 4698.88
              6,000.00 3 4158.30

value of A = 14,166.92

value of B = 200/0.10 = 2000

value of C = 35,000/1.125 = 19,859.94

12.00%
Cash flows Year Discounted CF
                           -   0 0.00
              2,500.00 1 2232.14
              2,500.00 2 1992.98
              2,500.00 3 1779.45
              2,500.00 4 1588.80
              2,500.00 5 1418.57
              8,500.00 6 4306.36

value of D = 13,318.31

19.00%
Cash flows Year Discounted CF
                           -   0 0.00
              3,000.00 1 2521.01
              2,000.00 2 1412.33
              8,000.00 3 4747.33
              7,000.00 4 3490.68
              4,000.00 5 1676.20
              1,000.00 6 352.14

value of E = 14,199.69
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