Question
(Present value of an uneven stream of payments) You are given three investment alternatives to analyze. The cash flows from these three investments are as
(Present value of an uneven stream of payments) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:
| Investment |
| ||||||||
| End of Year | A | B | C | ||||||
| 1 | $ | 1,000 | $ | 1,000 | $ | 5,000 | |||
| 2 | 2,000 | 1,000 | 5,000 | ||||||
| 3 | 3,000 | 1,000 | (5,000) | ||||||
| 4 | (4,000) | 1,000 | (5,000) | ||||||
| 5 | 4,000 | 5,000 | 15,000 | ||||||
What is the present value of each of these three investments if the appropriate discount rate is 8 percent?
a.What is the present value of investment A at an annual discount rate of 8 percent?
b.What is the present value of investment B at an annual discount rate of 8 percent?
c.What is the present value of investment C at an annual discount rate of 8 percent?
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