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Can someone tell me if i did this correctly and if not what I'm doing wrong?
Can someone tell me if i did this correctly and if not what I'm doing wrong?
Investment X offers to pay you $4,700 per year for eight years, whereas Investment Y offers to pay you $6,700 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 15 percent?
Investment X at 5% discount rate = $4700/1.05^8 = $3181.14
Investment X at 15% discount rate = $4700/1.15^8 = $1536.43
Investment Y at 5% discount rate = $6700/1.05^5 = $5249.62
Investment Y at 15% discount rate = $6700/1.15^5 = $3331.08
Investment Y has higher present value for both discount rates
