Purchase Solution

Time Value of Money-Present Value of two alternatives

Not what you're looking for?

Ask Custom Question

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).

Purchase this Solution
Solution Summary

The solution calculates Present Value of two alternatives.

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 ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • Time value of money

    The solution explains how to choose among alternatives using the time value of money

  • Effects of time value of money concepts used in accounting

    How does the length of time affect future and present value? How do these two factors correlate? What does the time value of money mean? Why is this concept important in accounting?

  • Time Value of Money

    23960 Time Value of Money Your grandfather has offered you a choice of one of the three following alternatives: $5,000 now; $1,000 a year for eight years; or $12,000 at the end of eight years.

  • Discounted Cash Flow Alternatives

    that it takes into account the time value of money.

  • NPV and Payback Period

    Compare the net present value approach with the payback approach. Which method is better in the given circumstances? Payback period does not take into account time value of money.

  • Cost of Capital-Capital Budgeting

    NPV: The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project.

  • Accounting 4

    c. does not recognize the time value of money. d. is easier to use than the net present value method.

  • Time Value of Money

    Since money has time value, the present value of a promised future amount is worth less the longer you have to wait to receive it.

  • Assume a $4,000 investment and the following cash flows for

    Also, it does not take any cash flow past the stated time period into consideration, compared to using a net present value or internal rate of return method. Assume a $4,000 investment and the following cash flows for two alternatives.

View More Related Solutions