Unformatted text preview: f both the
size of the rate of return and the time until receipt of payment on the present
value of a future sum.
LG2 4–15 Present value comparisons of single amounts In exchange for a $20,000 payment today, a well-known company will allow you to choose one of the alternatives shown in the following table. Your opportunity cost is 11%.
Alternative Single amount A $28,500 at end of 3 years B $54,000 at end of 9 years C $160,000 at end of 20 years a. Find the value today of each alternative.
b. Are all the alternatives acceptable, i.e., worth $20,000 today?
c. Which alternative, if any, will you take?
LG2 4–16 Cash flow investment decision Tom Alexander has an opportunity to purchase
any of the investments shown in the following table. 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?
$18,000 Single cash inflow Year of receipt $3...
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