Chrome File Edit View History Bookmarks People Window Help E, Unit 12-Time Value

Question

Chrome File Edit View History Bookmarks People Window Help E, Unit 12-Time Value of Money × Take Test: TVM practice problx v 47 Bra Secure https://blackboard.ecu.edu/webapps assessment/takelaunch.jsp?. QUESTION 1 Machine 1 - Saves nothing in year 1 - Save you $2,000 in year 2 - Saves $1,000 in year 3 What is the PV of the savings for machine 1? QUESTION 2 Machine 2: - Saves nothing in year 1 - Save you $1,000 in year 2 -Saves $2,000 in year 3 What is the PV of the savings for machine 2? QUESTION 3 Based on the PV of the savings for each machine, which would you buy? 1. Machine 1 2. Machine 2 Click Save and Submit to save and submit. Click Save All Answers to save all answers.

Explanation / Answer

Using BA II plus calculator for solving the problems:

1 Go to casf flow mode of calculator

CF0-0, CF1=0, CF2=2000, CF3= 1000 I= 5 CPT PV

PV of savings for machine 1=$2677.90

2.Go to casf flow mode of calculator

CF0-0, CF1=0, CF2=1000, CF3= 2000, I= 5,NPV CPT

PV of savings for machine 2=$2634.70

3. PV of Savings of Machine 1 is higher , Therefore we should buy Machine 1.

Note: Higher cashflows at the begining , higher will be NPV

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