AGEC 340 Class Assignment Date: Name: Class Assignment 17 Problem 1. Assume you have only $20,000 to invest and must choose between the two investments below. What are the payback period and average rate of return of each investment? Based on cach capital budgeting method, which investment would you select? Put your answers in the second table. Investment A (S) 20,000 Investment B (S) 20,000 5.000 Initial cost Net cash revenues Yearl Year 2 Year 3 Year 4 6,000 6.000 6,000 6,000 6,000 5,000 3,000 20.000 Years Investment A Investment B Which Investment Would You Select? Payback Period Average Rate of Return AGEC 340 Class Assignment Date: Name: Problem 2: Which would you prefer to have (1) $5,000 now, (2) $10,000 10 years from now assuming an 8 percent annual interest rate compounded annually, or (3) $15,000 20 years from now assuming an percent annual interest rate compounded semi-annually? (Hint: Compute the present value of cach alternative) Problem 3: Suppose you have invested $1,000 at an annual interest rate of 10 percent for 10 years. How much will you get after the investment period