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Problem 2 (15 points) : Supoose you are given the following three cash inflows from which to choose. Alternative A: Year-end receipts of $8,000 for
| Problem 2 (15 points): Supoose you are given the following three cash inflows from which to choose. | ||||||
| Alternative A: Year-end receipts of $8,000 for each of the next four years | ||||||
| Alternative B: A Single, lump-sum receipt of $33,000 at the end of the fourth year | ||||||
| Alternative C: Year-end receipt of $2,500 for each of the next four years plus a lump-sum receipt of $25,000 at the end of the fourth year | ||||||
| Which alternative would you choose if the annual discount rate of money is 8%, why? | ||||||
| Altnernative | ||||||
| A | B | C | ||||
| Number of Years | ||||||
| Annual discount rate | ||||||
| Periodic payment for the next four years | ||||||
| Payment Type | ||||||
| Lump-sum payment at the end of Year 4 | ||||||
| Present value of Future cash flows | ||||||
| Future value of cash flows | ||||||
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