PRESENT VALUE, you have a choice of accepting either of the two, 5-year cash flow streams or lump sum amounts’. One cash flow stream is an annuity, and the other is a mixed stream. You may accept alternative A or B Either as cash flow stream or as a lump-sum. Given the cash flow stream and lump-sum amounts associated with each, and assuming a 9% opportunity cost, which alternative (A or B) And in which form (cash flow stream or lump-sum amount) would you prefer? End of year Alternative A Alternative B 1 $700 $1,100 2 $700 $900 3 $700 7$00 4 $700 $500 5 $700 $300 LUMP-SUM AMOUNT At time zero $2,825 $2,800
PRESENT VALUE, you have a choice of accepting either of the two, 5-year cash flow streams or lump sum amounts’. One cash flow stream is an annuity, and the other is a mixed stream. You may accept alternative A or B Either as cash flow stream or as a lump-sum. Given the cash flow stream and lump-sum amounts associated with each, and assuming a 9% opportunity cost, which alternative (A or B) And in which form (cash flow stream or lump-sum amount) would you prefer? End of year Alternative A Alternative B 1 $700 $1,100 2 $700 $900 3 $700 7$00 4 $700 $500 5 $700 $300 LUMP-SUM AMOUNT At time zero $2,825 $2,800
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 11MC: In an unrelated analysis, you have the opportunity to choose between the following two mutually...
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Question
End of year |
Alternative A |
Alternative B |
1 |
$700 |
$1,100 |
2 |
$700 |
$900 |
3 |
$700 |
7$00 |
4 |
$700 |
$500 |
5 |
$700 |
$300 |
LUMP-SUM AMOUNT |
||
At time zero |
$2,825 |
$2,800 |
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