est Cash fhow investment decision Personal Finance Problem Tom Alexander has an
ID: 1172447 • Letter: E
Question
est Cash fhow investment decision Personal Finance Problem Tom Alexander has an opportunity to purchase any of the investments shown in the following table, The purchase price, the amount of the single cash inflow, and its year of receipt are given for each investment Which purchase recommendations would you make, assuming that Tom can eam 10% on his investments? Data Table Click the icon to see the Worked Solution (Formula Solution). Click the icon to see the Worked Solution (Financial Calculator Click the icon to see the Worked Solution (Spreadsheet Solution (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet) nvestmentPrice Single cash inflow Year of receipt $25 32 $2,623 $7,751 $29 413 $17,300 $519 The present value of Investment A is . (Round to the nearest cent) The present value of Investment B is S? (Round to the nearest cert) The present value or investment Cs (Round to the nearest cent ) The present valus of investment Dis(Round to the nearest cent) 18 $3.287 | 38 Print Done recor men abons would you make ass ng that Tom can earn 10% on he i est ens? (Select te best s s e below O A O B. Investments B and c Investments A and C Click to select your answerts)Explanation / Answer
Answer a.
Investment A:
Price = $17,300
Single Cash Inflow = $25,329
Year of Receipt = 3
Rate of Return = 10%
Present Value = -$17,300 + $25,329 / 1.10^3
Present Value = $1,730.05
Investment B:
Price = $519
Single Cash Inflow = $2,623
Year of Receipt = 18
Rate of Return = 10%
Present Value = -$519 + $2,623 / 1.10^18
Present Value = -$47.23
Investment C:
Price = $3,287
Single Cash Inflow = $7,751
Year of Receipt = 8
Rate of Return = 10%
Present Value = -$3,287 + $7,751 / 1.10^8
Present Value = $3,708.49
Investment D:
Price = $865
Single Cash Inflow = $29,413
Year of Receipt = 38
Rate of Return = 10%
Present Value = -$865 + $29,413 / 1.10^38
Present Value = -$78.65
Answer b.
Tom should select Investments A and C.
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