Two new opportunities are being considered for a venture capital firm. Both are one-time opportunities with no option for renewal. The firm uses a 12 percent/year expected rate of return for decisions of this type. The relevant characteristics for each option are shown below. Based on a present worth analysis, which option is preferred?

Transcribed Image Text:

Initial Investment Estimated Life Expected Annual Return Option 1 $100,000 Option 2 $75,000 12 years $16,500 9 years $14,300