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Use the following 3 cash flows to evaluate Methods #1 and #2 described below, both methods use the same discount rate: $200 at the end
Use the following 3 cash flows to evaluate Methods #1 and #2 described below, both methods use the same discount rate: $200 at the end of year 1, -$100 at the end of year 3, and $500 at the end of year 7. Method #1: Discount everything back to time zero and sum all the present values. Method #2: Discount the $500 to the end of year 3 and subtract $100, then discount the remaining value to the end of year 1 and add $200, then, discount the resulting value back to time zero. O There is not enough information to answer the question O Method #1 will have a higher present value (at time zero) than Method #2 Method #1 and Method #2 will yield the same present values at time zero. O Method #1 will have a lower present value (at time zero) than Method #2
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