Question

Investment X offers to pay you $5,500 per year for nine years, whereas Investment Y offers to pay you $8,000 per year for five years. a. Calculate the present value for Investments X and Y if the discount rate is 5 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. Calculate the present value for Investments X and Y if the discount rate is 15 percent.

Answer 1

Investment X = $39,093.02

Investment Y = $34,635.81

b

Investment X =$26,243.71

Investment y =$26,817.24

Step-by-step explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Investment X

Cash flow each year from year 1 to 9 = $5,500

PV when I is 5% = $39,093.02

PV when I is 15% =$26,243.71

Investment Y

Cash flow each year from year 1 to 5 = $8,000

PV when I is 5% = $34,635.81

PV when I is 15$26,243.71% = $26,817.24

To find the NPV 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