Question

Investment X offers to pay you $7,100 per year for 9 years, whereas Investment Y offers to pay you $9,700 per year for 5 years. a. If the discount rate is 8 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If the discount rate is 20 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

a.

NPV X 44352,90

NPV Y 38729,29

b.

NPV X 28619,86

NPV Y 29008,94

Explanation:

To get the present value of each cash flow we use excel or spreadsheets.

File is attached with the comparison of both investments.

Investment X

Net Present Value (NPV) 44353   (Interest rate 8%)

Net Present Value (NPV) 28620 (Interest rate 20%)

Investment Y

Net Present Value (NPV) 38729 (Interest rate 8%)

Net Present Value (NPV) 29009 (Interest rate 20%)