1. Investment in Sunrise Company is P 100,000 at the end of 5 years plus P 24,000 annually for 4 years afterwards. Investment in XYZ company offers P 50,000 semi-annually P 15,000 every 6 months after 6 years. Assume that the money is worth 9% compounded annually, which investment is preferable?

1. Investment in Sunrise Company is P 100,000 at the end of 5 years plus P 24,000 annually for 4 years afterwards. Investment in XYZ company offers P 50,000 semi-annually P 15,000 every 6 months after 6 years. Assume that the money is worth 9% compounded annually, which investment is preferable?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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Question

Additional Activities
Decide on the following problems by determining the fair market value. Show
your solutions in a sheet of paper together with your decision on the problem.
1. Investment in Sunrise Company is P 100,000 at the end of 5 years plus
P 24,000 annually for 4 years afterwards. Investment in XYZ company
offers P 50,000 semi-annually P 15,000 every 6 months after 6 years.
Assume that the money is worth 9% compounded annually, which
investment is preferable?
2. A motorcycle is for sale P 60,500 cash or on installment terms P 3,000
per month for 2 years at 12% compounded annually. If you were the
buyer, what would you prefer, cash or installment?

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