A company has a policy of requiring a tate of return on investment of 13%. Two investment alternatives are available but the company may choose only one. Alternative 1 offers a retum of S15,000 at the end of year five, 576.000 at the end of year nine and $30,000 after eleven years. Alternative 2 will return the company $1,200 at the end of each month for the next eleven years. Compute the present value of each alternative and determine the preferred alternative according to the discounfed cash low criterion The present value of Alternative 1 is $ (Round to the nearest dollar as needed Round all intermediate values to six decimal places as needed) The present value of Altermative 2 is S (Round to the nearest dollar as needed Round all intermediate values to six decimal places as needed) The preferred choice is
A company has a policy of requiring a tate of return on investment of 13%. Two investment alternatives are available but the company may choose only one. Alternative 1 offers a retum of S15,000 at the end of year five, 576.000 at the end of year nine and $30,000 after eleven years. Alternative 2 will return the company $1,200 at the end of each month for the next eleven years. Compute the present value of each alternative and determine the preferred alternative according to the discounfed cash low criterion The present value of Alternative 1 is $ (Round to the nearest dollar as needed Round all intermediate values to six decimal places as needed) The present value of Altermative 2 is S (Round to the nearest dollar as needed Round all intermediate values to six decimal places as needed) The preferred choice is
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A company has a policy of requiring a tate of return on investment of 13%. Two investment alternatives are available but the company may choose only one. Alternative
1 offers a retum of $15,000 at the end of year five, 576,000 at the end of year nine and $30,000 after eleven years. Alternative 2 will return the company $1,200 at the
end of each month for the next eleven years. Compute the present value of each alternative and determine the preferred alternative according to the discounfed cash
fow criterion
The present value of Alternative 1 is s
(Round to the nearest dollar as needed Round all intemediate vakues to six decimal places as needed)
The present value of Alternative 2 is $
(Round to the nearest dollar as needed Round all intermediate values to six decinmal places as needed)
The preferred choice is
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