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An obligation can be settled by making a payment of $1,000 now and a final payment of $23,000 in seven years (Alternative 1). Alternatively, the
An obligation can be settled by making a payment of $1,000 now and a final payment of $23,000 in seven years (Alternative 1). Alternatively, the obligation can be settled by payments of $1,500 at the end of every six months for nine years (Alternative 2). Interest is 11% compounded semi-annually. Compute the present value of each alternative and determine the preferred alternative according to the discounted cash flow criterion. The present value of Alternative 1 is $. (Round to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) The present value of Alternative 2 is $ (Round to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) Therefore, the best alternative is
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