how do I figure out B and C answers? The answer I have their is wrong? (Related
ID: 2732041 • Letter: H
Question
how do I figure out B and C answers? The answer I have their is wrong?
(Related to Checkpoint 6.6) (Present value of annuities and complex cash flows) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Investment Alternatives End of Year $ 10,000 10,000 10,000 10,000 10,000 $ 10,000 4 $ 10,000 10,000 10,000 10,000 50,000 7 a. What is the present value of investment A at an annual discount rate of 25 percent? S 26,892.80 (Round to the nearest cent.) b. What is the present value of investment B at an annual discount rate of 25 percent? $29.51 4.24 (Round to the nearest cent.) 29,514.24 (Round to the nearest cent.)Explanation / Answer
Investment B:Present value = (PVF@25% ,5*CF5)+(PVF@25%,6*CF6)..........(PVF@25%,10*CF10)
= ( .32768*10000)+(.26214*10000)+(.20972*10000)+(.16777*10000)+(.13422*10000)+(.10737*10000)
= 12088.5
Investment C = (PVF@25%,1*CF1)+(PVF@25%,6*CF6)+(PVF@25%,10*CF10)
= (.8*10000)+(.26214*10000)+(.10737*10000)
= 8000+ 2621.4+ 1073.7
= 11695.1
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