Daryl Kearns saved $ 2 4 0 , 0 0 0 during the 3 0 years that
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Question:
Daryl Kearns saved $ during the years that he worked for a major corporation. Now he has retired at the age of and has begun to draw a comfortable pension check every month. He wants to ensure the financial security of his retirement by investing his savings wisely and is currently considering two investment opportunities. Both investments require an initial payment of $ The following table presents the estimated cash inflows for the two alternatives:
Year Year Year Year
Opportunity $$ $ $
Opportunity
Mr. Kearns decides to use his past average return on mutual fund investments as the discount rate; it is 8 percent. ( PV of $1 and PVA of $1 )
Note: Use appropriate factor( s) from the tables provided.
Required
Compute the net present value of each opportunity. Which should Mr. Kearns adopt based on the net present value approach?
Compute the payback period for each project. Which should Mr. Kearns adopt based on the payback approach?
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