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Present Value

A firm has the following investment alternatives:

Cash Inflows
Year A B C
1 $500 $0 $0
2 $500 $400 $0
3 $500 $800 $0
4 $600 $900 $1900

Which investment should be considered? Use a 9.5% discount rate.

Solution Preview

A firm has the following investment alternatives:

Cash Inflows
Year A B C
1 $500 0 $0     
2 $500 $400 $0     
3 $500 $800 $0     
4 $600 $900 $1,900     

Which investment should be considered? Use a 9.5% discount rate.

We calculate the Present Value of each alternative

To ...

Solution Summary

Compares three investment alternatives by computing discounted values of cash flows.

$2.19