Investment X offers to pay you $4,800 per year for 9 years, whereas Investment Y offers to pay you $7,100 per year for 5 years. If the discount rate is 6 percent, what is the present value of these cash flows
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Ответ:
Answer and Explanation:
The computation is shown below:
Present value of investment X is
= Annuity × [1 - 1 ÷ (1 + r)^n] ÷ r
= $4,800 × [1 - 1 / (1 + 0.06)^9] ÷ 0.06
= $4,800 * 6.801692
= $32,648.12
And,
The Present value of investment Y is
= Annuity × [1 - 1 ÷ (1 + r)^n] ÷ r
= $7,100 × [1 - 1 ÷ (1 + 0.06)^5] ÷ 0.06
= $7,100 × 4.212364
= $29,907.78
Ответ: