10) Which of the following two options for purchasing an equipment has a lower net present cost? Assume a discount rate of 0.05. (Hint: Use Excel for easier calculations.) a Initial payment of $2000, then $550 monthly for4 months. b. Initial payment of $3000, then $200 monthly for 5 months.

10) Which of the following two options for purchasing an equipment has a lower net present cost? Assume a discount rate of 0.05. (Hint: Use Excel for easier calculations.) a Initial payment of $2000, then $550 monthly for4 months. b. Initial payment of $3000, then $200 monthly for 5 months.

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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Question

10) Which of the following two options for purchasing an equipment has a lower net present
cost? Assume a discount rate of 0.05. (Hint: Use Excel for easier calculations.)
a. Initial payment of $2000, then $550 monthly for4 months.
b. Initial payment of $3000, then $200 monthly for 5 months.
11) Why should a higher discount rate be applied to an investment with a higher risk?

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