# Question

A firm must choose between two investment alternatives, each costing $100,000. The first alternative generates $35,000 a year for four years.

The second pays one large lump sum of $157,400 at the end of the fourth year. If the firm can raise the required funds to make the investment at an annual cost of 10 percent, which alternative should be preferred?

The second pays one large lump sum of $157,400 at the end of the fourth year. If the firm can raise the required funds to make the investment at an annual cost of 10 percent, which alternative should be preferred?

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