Investment X offers to pay you $5,200 per year for 9 years, whereas Investment Y offers to pay you $7,500 per year for 5 years. If the discount rate is 5 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.) If the discount rate is 15 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)

Instructions are listed below

Explanation:

Giving the following information:

Investment X offers to pay you $5,200 per year for 9 years, whereas Investment Y offers to pay you $7,500 per year for 5 years.

First, we need to determine the final value to determine the present value:

FV = {A*[ (1+i) ^n-1]}/i

A = annual payment

PV = FV / (1+i) ^n

A) i = 5%

Investment X:

FV = {5200*[ (1.06^9) - 1]}/0.06 = $59,754.84

PV = 59,754.84 / 1.06^9 = $35,368.80

Investment Y:

FV = {7500*[ (1.06^5) - 1]}/0.06 = $42,278.20

PV = 42,278.20/1.06^5 = $31,592.73

B) i = 15%

Investment X:

FV = {5200*[ (1.15^9) - 1]}/0.15 = $87,286.38

PV = 87,286.38 / 1.15^9 = $24,812.24

Investment Y:

FV = {7500*[ (1.15^5) - 1]}/0.15 = $50,567.86

PV = 50,567.86/1.15^5 = $25,141.16