Your client is considering the purchase of $100,000 in common stock, which pays no dividends

and will appreciate in market value by 10 percent per year. At the same time, the

client is considering an opportunity to invest $100,000 in a lease obligation that will provide

the annual year-end cash flows listed in Exhibit 14.23 below. Assume that each investment

will be sold at the end of three years and that you are given no additional

information.

Calculate the present value of each of the two investments assuming a 10 percent discount

rate, and state which one will provide the higher return over the three-year period.

Use the data in Exhibit 14.23, and show your calculations.

Please provide a detailed answer with formulas in Excel for a great rating. Thank you!

Exhibit 14.23 Annual Cash Flow from Lease End of Year 2 Lease receipts 15.000 3 Lease receipts 25,000 $100,000 4 Sale proceeds Present Value of $1 Period 10% 0.943 0.926 0.909 0.890 0.857 0.826 0.794 0.840 0.751 0.792 0.735 0.683 0.747 0.681 0.621 12% 0.893 0.797 0.712 0.636 0.567