Quiz Quiz 5a Chapter 5 Tlme Value of Money Time Remaining 02

Quiz: Quiz 5a Chapter 5 Tlme Value of Money Time Remaining: 02 06 52 Submit Qui This Question: 9 pts 30f 11 (0 complete) ? This Quiz: 59 pts possible o: ts Cash now investment decision Personal Finance Problem Tom Ale ander has an opportunity to purchase any of the investments st n n the folowing table ? The purchase pice the armourt of the sr e cash infor and its year of recept are gi en for each mestment which purchase recommendations would you make, assuming that Tom can earn 10% on Data be Click the icon to see the Worked Solution (Formula Solution) Click the icon to see the Worked Solution (Financial Calculato Click the icon to see the Worked Solution (Spreadsheet Soluti The present value of investment A is (Round to the nearest cent) The present value of investment B is (Round tothe nearest cent ) The present value of Investment C is?(Round to the nearest cent) present value of investment Dis?Round to the nearest cent ) (Click on the icon located on the top-fright comer of the data table below in order to copy its contents into a spreadsheet) investment Price Single cash inflow Year of receipt 21,400$37.911 $3,926 $11,601 $44 025 $642 $4,066 $1,070 20 10 40 Print Done which purchase recommendations would you male, assuming that Tom can earn 10% on hs investments? : Select tre best answer below ) OA Investments B and C B. Investments A and C Cick to select your anowero)

Solution

PV =- Initial cost + PV of inflows

PV of A= - 21400+ 37911/(1+0.1)^5= 2139.75

PVof B= -642+ 3926/1.1^20 = - 58.43

PV of C = -4066+ 11601/1.1^10=$406.69

PV of D = -1070+ 44025/1.1^40= ($97.27)

Purchase Investments A and C since they have positive Present values.