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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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