Answer:
Present value for option 1 = $1,460,000
Present value for option 2 = $1,460,971.84
Present value for option 3 = = $1,324,815.67
Present value for option 4 = $1,614,077.65
Explanation:
Present value is the sum of discounted cash flows.
Present value can be calculated using a financial calculator.
For the first option, the present value is $1,460,000.
For the second option:
Cash flow in year zero = $460,000
Cash flow each year from year one to ten =
$136,000
I = 6%
Present value = $1,460,971.84
For the third option:
Cash flow each year from year 1 to 10 = $180,000
I = 6%
Present value = $1,324,815.67
For the fourth option:
Cash flow each year from year 1 to 4 = 0
Cash flow in year 5 = $2,160,000
I = 6%
Present value = $1,614,077.65
To find the PV using a financial calacutor:
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
I hope my answer helps you
