Annual cash inflows that will arise from two competing investment projects are g
ID: 2411194 • Letter: A
Question
Annual cash inflows that will arise from two competing investment projects are given below:
The discount rate is 9%.
Compute the present value of the cash inflows for each investment. Each investment opportunity will require the same initial investment. (Use Microsoft Excel to calculate present values. Do not round intermediate calculations.)
Annual cash inflows that will arise from two competing investment projects are given below:
Investment A: Item Year 1 Cash Inflow Year 2 Cash Inflow Year 3 Cash Inflow Year 4 Cash Inflow NPV of Cash Inflows RATE NPER PMT PV Investment B: Item Year 1 Cash Inflow Year 2 Cash Inflow Year 3 Cash Inflow Year 4 Cash Inflow NPV of Cash Inflows RATE NPER PMT FV PVExplanation / Answer
Investment - A
Item
Cash Flow
Present Value Factor
Present Value of cash flow
Year 1 cash Inflow
5,000
0.917431
4,587.16
Year 2 cash Inflow
6,000
0.841680
5,050.08
Year 3 cash Inflow
7,000
0.772183
5,405.28
Year 4 cash Inflow
8,000
0.708425
5,667.40
Total Present Value of cash flows
$20,709.92
Investment - B
Item
Cash Flow
Present Value Factor
Present Value of cash flow
Year 1 cash Inflow
8,000
0.917431
7,339.45
Year 2 cash Inflow
7,000
0.841680
5,891.76
Year 3 cash Inflow
6,000
0.772183
4,633.10
Year 4 cash Inflow
5,000
0.708425
3,542.13
Total Present Value of cash flows
$ 21,406.44
Item
Cash Flow
Present Value Factor
Present Value of cash flow
Year 1 cash Inflow
5,000
0.917431
4,587.16
Year 2 cash Inflow
6,000
0.841680
5,050.08
Year 3 cash Inflow
7,000
0.772183
5,405.28
Year 4 cash Inflow
8,000
0.708425
5,667.40
Total Present Value of cash flows
$20,709.92