Annual cash inflows that will arise from two competing investment projects are g

Question

Annual cash inflows that will arise from two competing investment projects are given below:

    

The discount rate is 18%.

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Compute the present value of the cash inflows for each investment. Each investment opportunity will require the same initial investment. (Use the appropriate table to determine the discount factor(s).)

Year Investment A Investment B 1 3,000       12,000       2 6,000       9,000       3 9,000      6,000       4 12,000       3,000       Total $30,000       $30,000      

Explanation / Answer

Particulars Year PVF @ 18% Cash Flow Investment A Cash Flow Investment B PV Investment A PV Investment B Cash Inflows 1            0.85 3000 12000         2,542.37      10,169.49 Cash Inflows 2            0.72 6000 9000         4,309.11        6,463.66 Cash Inflows 3            0.61 9000 6000         5,477.68        3,651.79 Cash Inflows 4            0.52 12000 3000         6,189.47        1,547.37 Present Value       18,518.62      21,832.30

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