1. value: 4.00 points Annual cash inflows that will arise from two competing investment projects are given below Year Investment A Investment B $2,000 3,000 4,000 5,000 1 $5,000 4,000 3,000 2,000 2 3 4 Total $14,000 $14,000 The discount rate is 10 %. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment. Each investment opportunity will require the same initial investment. (Use the appropriate table to determine the discount factor(s).) Amount of Cash Flows Present Value of Cash Flows Investment Investment 10% Investment A Investment B Year A Factor S 1 2,000 5,000 S 2 3,000 4,000 3 4,000 $ 3,000 4 5,000 2.000 $ $ Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $157,000 immediately as her full retirement benefit. Under the second option, she would receive $20,000 each year for six years plus a lump-sum payment of $65,000 at the end of the six-year period. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: 1a. Calculate the present value for the following assuming that the money can be invested at 12 %. (Use the appropriate table to determine the discount factor(s).) Present Value of First Option Cash Flow Discount Factor Present Value 157,000 Lump-sum payment Present Value of Second Option Discount Factor Cash Flow Present Value Annual annuity 20,000 Lump-sum payment 65,000 Total present value $ C Fraser Company will need a new warehouse in three years. The warehouse will cost $440,000 to build. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What lump-sum amount should the company invest now to have the $440,000 available at the end of the three-year period? Assume that the company can invest money at ten percent. T(Use the appropriate table to determine the discount factor(s).) Amount to be Invested Discount Factor Investment Present Value 440,000 2. What lump-sum amount should the company invest now to have the $440,000 available at the end of the three-year period? Assume that the company can invest money at six percent. (Use the appropriate table to determine the discount factor(s).) Amount to be Invested Present Value Discount Factor Investment 440,000 The Atlantic Medical Clinic can purchase a new computer system that will save $10,000 annually in billing costs. The computer system will last for eleven years and have no salvage value. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: Up to how much should the Atlantic Medical Clinic be willing to pay for the new computer system if the clinic's required rate of return is: (Use the appropriate table to determine the discount factor(s).) Present Value Purchase Discount Factor Present Value 1. Nine percent 2 Ten percent
