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4% Determine the value of M that will make the 2 cash flows equivalent at 7
Expert Answer
| Project 1 | |||
| Year | CF | PVF @ 4% | PV |
| 0 | 300 | 1 | 300 |
| 1 | 2M | 0.961538 | 2M * 0.961538 |
| 2 | 0 | 0.924556 | 0 |
| 3 | 0 | 0.888996 | 0 |
| 4 | 0 | 0.854804 | 0 |
| 5 | 5M | 0.821927 | 5M * 0.821927 |
| 6 | 0 | 0.790315 | 0 |
300 = 6.0327 M
=> M = 49.73
Note – It is not clear in the question in which year a cash outflow is happening in picture 2. Assuming it is in year 0 of the project the question has been solved. Otherwise, please let me know. Manyt thanks.
