Present value of an uneven stream of payments) You are given three investment al
ID: 2615746 • Letter: P
Question
Present value of an uneven stream of payments) You are given three investment alternatives to analyze. The cash flows from these three investments are shown in the popup window:?. Assuming a discount rate of 22 percent, find the present value of each investment. a. What is the present value of investment A at 22 percent annual discount rate? $57,272.79 (Round to the nearest cent.) b. What is the present value of investment B at 22 percent annual discount rate? $ 28,590.87 (Round to the nearest cent.) c. What is the present value of investment C at 22 percent annual discount rate? $(Round to the nearest cent.)Explanation / Answer
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
1.Present value=20000/1.22+20000/1.22^2+20000/1.22^3+20000/1.22^4+20000/1.22^5
=20000[1/1.22+1/1.22^2+1/1.22^3+1/1.22^4+1/1.22^5]
=$20000*2.863639762
=$57272.80(Approx).
2.Present value=20000/1.22^5+20000/1.22^6+20000/1.22^7+20000/1.22^8+20000/1.22^9+20000/1.22^10
=20000[1/1.22^5+1/1.22^6+1/1.22^7+1/1.22^8+1/1.22^9+1/1.22^10
=20000*1.429543824
=$28590.88(Approx),
3.Present value=20000/1.22+100,000/1.22^6+20000/1.22^10
=(20000*0.819672131)+(100,000*0.303278075)+(20000*0.136899446)
which is equal to
=$49459.24(Approx).
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