The following data have been gathered for a capital investment decision.The amounts relate to a 14 percent discount factor.
$\begin{array}{ccc}
\text { End of Period } & \text { Present Value of \$1 } & \text { Present Value of an Annuity of \$1 } \
1 & .877 & .877 \
2 & .769 & 1.646 \
3 & .675 & 2.321 \
4 & .592 & 2.913 \
5 & .519 & 3.432 \
6 & .456 & 3.888
\end{array}$
a. Compute the present value of the following cash flows. Use a discount rate of 14 percent.

b. What would have been the present value of the cash flows if they were received in equal installments over the five-year period at the same discount rate?
c. If the answers to parts (a) and (b) differ, explain the reason(s) why.

Question

The following data have been gathered for a capital investment decision.The amounts relate to a 14 percent discount factor.
 $\begin{array}{ccc}
\text { End of Period } & \text { Present Value of \$1 } & \text { Present Value of an Annuity of \$1 } \
1 & .877 & .877 \
2 & .769 & 1.646 \
3 & .675 & 2.321 \
4 & .592 & 2.913 \
5 & .519 & 3.432 \
6 & .456 & 3.888
\end{array}$ 
a. Compute the present value of the following cash flows. Use a discount rate of 14 percent.
 
b. What would have been the present value of the cash flows if they were received in equal installments over the five-year period at the same discount rate?
c. If the answers to parts (a) and (b) differ, explain the reason(s) why.

Quizplus · Accepted Answer

The Answer of The following data have been gathered for a capital investment decision.The amounts relate to a 14 percent discount factor.
 $\begin{array}{ccc}
\text { End of Period } & \text { Present Value of \$1 } & \text { Present Value of an Annuity of \$1 } \
1 & .877 & .877 \
2 & .769 & 1.646 \
3 & .675 & 2.321 \
4 & .592 & 2.913 \
5 & .519 & 3.432 \
6 & .456 & 3.888
\end{array}$ 
a. Compute the present value of the following cash flows. Use a discount rate of 14 percent.
 
b. What would have been the present value of the cash flows if they were received in equal installments over the five-year period at the same discount rate?
c. If the answers to parts (a) and (b) differ, explain the reason(s) why.

The Following Data Have Been Gathered for a Capital Investment