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i Craig:

I am already having trouble understanding Chapter 6, problem 2 on page 207 of textbook. I am currently on week 3 of the FIN 200 class. The problem reads as follows:

If you require a 9 percent return on your investments, which would you prefer?

a. $5,000 today
b. $15,000 five years from today
c. $1,000 per year for 15 years

Please help or give me some guidance. Thank you.

  • Finance -

    b) present value = 15000(1.09)^-5
    = ....

    c) present value = 1000[1 - 1.09)^-15]/.09
    = .... (assuming payments made at the end of the year)

  • Fin 200 -

    Hi Reba,

    I am taking the same course as you are but only in week 1, I wanted to ask you for help with the statement of cash flow, did you understand how to accomplish this? I am very confused ... maybe you can help me.

    thank you,
    southern belle

  • Finance -

    We expect that we can receive annual incremental income after taxes of $15,000 which includes an adjustment for uncollectible accounts. What is the maximum commitment to A/R we should be willing to assume if our firm's minimum required after-tax return is 12%?

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