Present value comparisons of single amounts In exchange for a $20,000 payment today, a well-known company will allow you to choose one of the alternatives shown in the following table. Your opportunity cost is 11%. Alternative Single amount A $28,500 at end of 3 years B $54,000 at end of 9 years C $160,000 at end of 20 years Find the Present value of each alternative. Are all the alternatives acceptable? Which alternative, if any, will you take?
Present value comparisons of single amounts In exchange for a $20,000 payment today, a well-known company will allow you to choose one of the alternatives shown in the following table. Your opportunity cost is 11%. Alternative Single amount A $28,500 at end of 3 years B $54,000 at end of 9 years C $160,000 at end of 20 years Find the Present value of each alternative. Are all the alternatives acceptable? Which alternative, if any, will you take?
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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Present value comparisons of single amounts In exchange for a $20,000 payment today, a well-known company will allow you to choose one of the alternatives shown in the following table. Your
|
Alternative |
Single amount |
|
A |
$28,500 at end of 3 years |
|
B |
$54,000 at end of 9 years |
|
C |
$160,000 at end of 20 years |
- Find the Present value of each alternative.
- Are all the alternatives acceptable?
- Which alternative, if any, will you take?
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