Answered: Tom Alexander has an opportunity to…

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

6th Edition

ISBN:9781337117005

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter4: Managing Your Cash And Savings

Section: Chapter Questions

Problem 8FPE: DETERMINING THE RIGHT AM OUNT OF SHORT-TERM, LIQUID INVESTM ENTS. Leo and Ava Bryant together earn...

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Tom Alexander has an opportunity to purchase any of the investments shown in the following table

Investment	Price	Single cash inflow	Year of Receipt
A	$18,000	$30,000	5
B	$600	$3,000	20
C	$3,500	$10,000	10
D	$1,000	$15,000	40

The purchase price, the amount of the single cash inflow, and its year of receipt are given for each investment. Which purchase recommendations would you make, assuming that Tom can earn 10% on his investments?

The present value of Investment A is $

The present value of Investment B is $

The present value of Investment C is $

The present value of Investment D is $

Which purchase recommendations would you make, assuming that Tom can earn 10% on his investments?

A.Investment B

B.Investments A and C

C.Investments B and C

D.Investment D

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