Answered>Order 1878

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