I asked this yesterday:
How can you compare the calculated PV in light of the fact that the undiscounted cash flow totals $150,000 in each case?????
15%
Cash Flow Stream
year a b
1 .... 50,000 ....10,000
2 .....40,000 .... 20,000
3 .... 30,000..... 30,000
4 .... 20,000 .... 40,000
5 .....10,000 .... 50,000
..150,000 ..150,000 totals
For "A" using financial tables total NPV is $109,856.33 and using Excel an function the total NPV is $109,856.33
For "B" using financial tables total NPV is $91,290.00 and using Excel an function the total NPV is $91,272.98
Here is the answer I got:
You compare $109.9K vs $91.3K. Given the choice you would select Option A as this yields the higher result, reflecting the fact that you have a higher amount of $$ in the early period of the cash flow stream.
The question remains: why the same totals but different NPV
2006-11-04
00:34:03
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2 answers
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asked by
Anonymous
in
Business & Finance
➔ Investing