Exercise 13A-1 Basic Present Value Concepts [LO13-7]
Annual cash inflows that will arise from two competing investment projects are given below:
| Year | Investment A | Investment B | ||
| 1 | $ | 1,000 | $ | 4,000 |
| 2 | 2,000 | 3,000 | ||
| 3 | 3,000 | 2,000 | ||
| 4 | 4,000 | 1,000 | ||
| $ | 10,000 | $ | 10,000 | |
The discount rate is 9%.
Required:
Compute the present value of the cash inflows for each investment. Each investment opportunity will require the same initial investment.
Investment project B is best.
No comments:
Post a Comment