Time Value Comparison of Single Amounts Assume you need to choose one of the alternatives shown in the following table in exchange for a payment of $20,000 today. Alternative 1: $28,500 at the end of 3 years Alternative 2: $54,000 at the end of 9 years Alternative 3: $160,000 at the end of 20 years Required: Find the value today of each alternative assuming your opportunity cost is 11%. Are all the alternatives acceptable, meaning are they worth $20,000 today? Which alternative, if any, will you choose?
Time Value Comparison of Single Amounts Assume you need to choose one of the alternatives shown in the following table in exchange for a payment of $20,000 today. Alternative 1: $28,500 at the end of 3 years Alternative 2: $54,000 at the end of 9 years Alternative 3: $160,000 at the end of 20 years Required: Find the value today of each alternative assuming your opportunity cost is 11%. Are all the alternatives acceptable, meaning are they worth $20,000 today? Which alternative, if any, will you choose?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 13P
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Time Value Comparison of Single Amounts
Assume you need to choose one of the alternatives shown in the following table in exchange
for a payment of $20,000 today.
Alternative 1: $28,500 at the end of 3 years
Alternative 2: $54,000 at the end of 9 years
Alternative 3: $160,000 at the end of 20 years
Required:
- Find the value today of each alternative assuming your
opportunity cost is 11%. - Are all the alternatives acceptable, meaning are they worth $20,000 today?
- Which alternative, if any, will you choose?
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