Investment X offers to pay you $4,500 per year for nine years, whereas Investment Y offers to pay you $7,000 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 22 percent?

Investment X offers to pay you $4,500 per year for nine years, whereas Investment Y offers to pay you $7,000 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 22 percent?

Foundations of Business (MindTap Course List)

6th Edition

ISBN:9781337386920

Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Chapter16: Mastering Financial Management

Section: Chapter Questions

Problem 2DQ

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Investment X offers to pay you $4,500 per
year for nine years, whereas Investment Y offers to pay you $7,000 per year for five
years. Which of these cash flow streams has the higher present value if the discount
rate is 5 percent? If the discount rate is 22 percent?

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