A business has two investment choices. Alternative 1 requires an immediate outlay of $2000 and offers a return of $7000 after seven years. Alternative 2 requires an immediate outlay of $1800 in return for which $250 will be received at the end of every six months for the next seven years. The required rate of return on investment is 17% compounded semi-annually.
For the investment choices, compute the net present value. Determine investment should be accepted or rejected according to the net present value criterion.