Compute the present worth for the actual dollar cashflow

Reference no: EM13181758

There is an investment opportunity that you would like to analyze. The opportunity requires that you pay $20,000 today, and in return, the investment would send you a check for $6000 at the end of the first year, $8000 at the end of the second year, and $12,000 at the end of the third year. The average inflation rate through the three years is 5% and the inflation-free interest rate is 10% per year.

a) Compute and draw the actual dollar AND constant dollar cashflows for the investment

b) Compute the present worth for the actual dollar cashflow

c) Compute the present worth for the constant dollar cashflow.

Reference no: EM13181758

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