Question

"Investment X offers to pay you $5,800 per year for 9 years, whereas Investment Y offers to pay you $8,600 per year for 5 years. If the discount rate is 5 percent, what is the present value of these cash flows?"

Answer 1

Answer:

Present value of investment X = $41,225.37

Present value of investment Y = $37,233.50

Explanation:

The present value of the cash flows can be found by discounting the cash flows at the discount rate.

This can be found using a financial calculator

Cash flow each year from year 1 to 9 for investment X = $5,800 

Discount rate = 5%

Present value = $41,225.37

Cash flow each year from year one to year 5 for investment Y = $8,600 

Discount rate = 5%

Present value = $37,233.50

I hope my answer helps you