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Time Value of Money-Present Value of two alternatives

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Suppose you have the option to receive \$1000 every year starting next year, lasting for 20 years or to receive \$2000 every year starting next year for the next 5 years with an interest rate of 5 % wich one is better. (show calculations as a fixed payment loan).

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Solution Preview

To compare the two we will have to calculate the present value of the two cash flow

Cash flow 1: \$1000 every year for the next 20 years
Cash flow 2: \$2000 every year for the next 5 years

Cash flow 1: \$1000 every year for the next 20 years
Payment A Annual
No of ...

Solution Summary

The solution calculates Present Value of two alternatives.

\$2.49