Two investment opportunities are open to you: Investment 1 and Investment 2. Each has an initial cost of $10,000. Assuming that you desire a 10 percent return on your initial investment, compute the net present value of the two alternatives and evaluate their relative attractiveness:
Investment 1 Investment 2
Cash Flows Year Cash Flows Year
$5,000 1 $8,000 1
6,000 2 7,000 2
7,000 3 6,000 3
8,000 4 5,000 4
Two investment opportunities are open to you: Investment 1 and Investment 2. Each has an initial cost of $10,000. Assuming that you desire a 10 percent return on your initial investment, compute the net present value of the two alternatives and evaluate their relative attractiveness:
Investment 1 Investment 2
Cash Flows Year Cash Flows Year
$5,000 1 $8,000 1
6,000 2 7,000 2
7,000 3 6,000 3
8,000 4 5,000 4
Related questions
Finance
1. What is the present value of $800 to be received at the end of eight years, assuming the following annual interest rate?
a. 4 percent, discounted annually
b. 8 percent, discounted annually
c. 20 percent, discounted quarterly
d. 0 percent
2. BASIC 13. Two investment opportunities are open to you: Investment 1 and Investment 2. Each has an initial cost of $10,000. Assuming that you desire a 10 percent return on your initial investment, compute the net present value of the two alternatives and evaluate their relative attractiveness:
| Investment 1 | Investment 2 | ||
| Cash Flows | Year | Cash Flows | Year |
| 5,000 | 1 | 8,000 | 1 |
| 6,000 | 2 | 7,000 | 2 |
| 7,000 | 3 | 6,000 | 3 |
| 8,000 | 4 | 5,000 | 4 |
