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Sagot :
Answer:
Investment X PV=$43,357.71
Investment Y PV=$37,666.45
Explanation:
The present value of future cash flows is the today's worth of those cash flows by virtue of discounting the cash flows to present time
The present value of a future cash flow=future cash flow/(1+discount rate)^n
n refers to the period in which the cash flow is expected , for instance,for year 1 cash flow n is 1, 2 for year 2 and so on.
Investment X:
PV=$6,100/(1+5%)^1+$6,100/(1+5%)^2+$6,100/(1+5%)^3+$6,100/(1+5%)^4+$6,100/(1+5%)^5+$6,100/(1+5%)^6+$6,100/(1+5%)^7+$6,100/(1+5%)^8+$6,100/(1+5%)^9=$43,357.71
Investment Y:
PV=$8,700/(1+5%)^1+$8,700/(1+5%)^2+$8,700/(1+5%)^3+$8,700/(1+5%)^4+$8,700/(1+5%)^5=$37,666.45
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