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    Financial Management

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    1. 1. Which of the following would be the best investment based on present value? Assume an annual discount rate of 16%

    a. An investment that pays $5,000 at the end of each year for 6 years, assuming annual compounding.
    b. An investment that pays $1,225 at the end of each quarter for 6 years, assuming quarterly compounding
    c. An investment that pays $1,200 at the beginning of each quarter 6 years, assuming quarterly compounding?
    d. $19,000 today.
    e. The answer cannot be determined from the information given.

    Year Undiscounted free cash flows
    0 (380,000)
    1 20,000
    2 30,000
    3 200,000
    4 175,000
    5 130,000
    6 145,000

    Required rate of return 15%

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    https://brainmass.com/business/finance/financial-management-19179

    Solution Preview

    Project a: Payment=5000, N=6, interest(discount) rate=16%
    <br>Compute present ...

    $2.49

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