Answer:
Investment Y has a greater present value
Explanation:
present value is the sum of disoucnted cashflows
i would choose an interest rate of 10% to calcuate the present values
for investment X
cash flow in year 1 = $5,000
cash flow in year 2 = $7,000
cash flow in year 3 = $9,000
cash flow in year 4 = $11,000
I = 10%
PV = $24,605.56
or investment Y
cash flow in year 1 = $11,000
cash flow in year 2 =$9,000
cash flow in year 3 = $7,000
cash flow in year 4 = $5,000
I = 10%
PV = $26,112.29
Investment Y has a greater present value
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
