Investment options A and B are equally risky and have identical initial costs. Each investment will produce
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Question:
Investment options A and B are equally risky and have identical initial costs. Each investment will produce cash inflows of $20,000. Option A will pay $8,000 the first year followed by four annual payments of $3,000 each. Option B will pay five annual payments, starting in 1 year, of $4,000 each. Which one of the following statements is correct given these two investment options? Assume a positive rate of return.
Select one:
A. Option B has a higher net present value.
B. Neither investment should be undertaken.
C. Option A is the better investment.
D. Both options are of equal value.
E. Option B has a lower future value at Year 5.
Related Book For
Fundamentals of Investing
ISBN: 978-0133075359
12th edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
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