Loose-leaf Version For Microeconomics
5th Edition
ISBN: 9781319108625
Author: KRUGMAN, Paul; Wells, Robin
Publisher: Worth Publishers
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Question
Chapter 9A, Problem 1P
To determine
To calculate:
The present value by considering the given situation
Concept Introduction:
Present value: The present value is the current worth of a future sum of money on a given interest rate
The present value is calculated by the following formula
- PV
= Cash flow at period 
=
=number of periods.
Expert Solution & Answer
Explanation of Solution
- The
net present value of plan (i) is calculated by the following - The present value of the (i) plan can be found out by the following
The present value of the (ii) is calculated by the following way
- =
= 
=
So plan (i) is considered to be less as compared to plan (ii)
- =
= 
The present value of the (ii) plan can be found out by the following
- =
= 
= 
So now the plan (ii) is less expensive
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Chapter 9A Solutions
Loose-leaf Version For Microeconomics
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