1. The Coffee Corp. has an opportunity to invest P1,500,000 in investment A or investment B. Investment A promises to pay P500,000 profit at the end of the first year, P550,000 at the end of two years, P600,000 at the end of three years, and P625,000 at the end of four years. Investment B promises to pay P25,000 profit at the end of the first year, P100,000 at the end of two years, P600,000 at the end of the third year, and P1,000,000 at the end of four years. Assume that nine percent per year is an appropriate discount rate for each investment. Also, assume a zero scrap value for each investment at the end of four years. 
2. Determine which investment promises to be the better of the two for the company.

Answer rating: 100% (QA)

To determine which investment is better we need to calculate the present value of the cash flows for ... View the full answer