The Following Data Have Been Gathered for a Capital Investment

question 87

Essay

The following data have been gathered for a capital investment decision. The amounts relate to a 14 percent discount factor.
$\begin{array}{|l|l|l|}\hline \text { Fnd of Period } & \text { Present Value of \$1 } & \text { Present Value of an Anunuity of \$1 } \\\hline 1 & .877 & .877 \\\hline 2 & .769 & 1.646 \\\hline 3 & .675 & 2.321 \\\hline 4 & .592 & 2.913 \\\hline 5 & .519 & 3.432 \\\hline 6 & .456 & 3.888 \\\hline\end{array}$
a. Compute the present value of the following cash flows. Use a discount rate of 14 percent.
$\begin{array}{|l|l|}\hline \text { Year 1 } & \$ 40,000 \\\hline \text { Year 2 } & 60,000 \\\hline \text { Year 3 } & 50,000 \\\hline \text { Year 4 } & 50,000 \\\hline \text { Year 5 } & 40,000 \\\hline\end{array}$
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.

---

Definitions:

Branch Of Mathematics

A specific area of study within the wider field of mathematics, such as algebra, geometry, or calculus.

Numerical Data

Information expressed in numbers, allowing for mathematical operations to be performed.

Quasi-experimental Research

A research method that seeks to establish a cause-and-effect relationship, without the full control or random assignment found in true experimental designs.

Preexisting Groups

Groups that have been formed before the implementation of a study, not generated by random assignment or manipulation by the researcher.