|
Title: A selection has to be made between two investment alternatives. The first alternative offers a net ... Post by: majarm on Nov 27, 2017 A selection has to be made between two investment alternatives. The first alternative offers a net return of $47 000.00 after three years, $30 000.00 after five years and $26 000.00 after seven years. The second alternative provides a net return of $13 000.00 per year for seven years. Determine the preferred alternative according to the discounted cash flow criterion if money is worth 11%.
Title: Re: A selection has to be made between two investment alternatives. The first alternative offers a ... Post by: yacom on Nov 27, 2017 ALT. 1 = 47000.00(1.11)-3 + 30000.00(1.11)-5 + 26000.00(1.11)-7
= 47000.00(.7311914) + 30000.00(.5934513) + 26000.00(.4816584) = 34366.00 + 17803.54 + 12523.12 = $64692.66 = $64 693. ALT. 2 = 13000.00 = 13000.00(4.7121963) = $61258.55 = $61 259 Since at 11% the present value of Alternative 1 is greater than the present value of Alternative 2, Alternative 1 is preferable. |