Exercise 11A-1 Basic Present Value Concepts [LO11-5] Annual cash inflows that wi
ID: 2473412 • Letter: E
Question
Exercise 11A-1 Basic Present Value Concepts [LO11-5]
Annual cash inflows that will arise from two competing investment projects are given below:
The discount rate is 13%.
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).)
Annual cash inflows that will arise from two competing investment projects are given below:
Explanation / Answer
Investment A Year Cash flow $ Pv@13% PV $ 1 8,000 0.8850 7,079.65 2 9,000 0.7831 7,048.32 3 10,000 0.6931 6,930.50 4 11,000 0.6133 6,746.51 NPV 27,804.97 Investment B Year Cash flow $ Pv@13% PV $ 1 11,000 0.8850 9,734.51 2 10,000 0.7831 7,831.47 3 9,000 0.6931 6,237.45 4 8,000 0.6133 4,906.55 NPV 28,709.98
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