You are deciding between two investments in the healthcare field. Each investment is projected to produce the
Question:
You are deciding between two investments in the healthcare field. Each investment is projected to produce the following cash flows:
Investment One
| Year | Cash |
| 0 | -$150,000 |
| 1 | $10,000 |
| 2 | $8,000 |
| 3 | $25,000 |
| 4 | $50,000 |
| 5 | $25,000 |
| 6 | $50,000 |
Investment Two
| Year | Cash |
| 0 | -$100,000 |
| 1 | 0 |
| 2 | 0 |
| 3 | 0 |
| 4 | 0 |
| 5 | $54,000 |
| 6 | $65,000 |
Assume a discount rate of 5%. Which investment would you prefer? Why?
Assignment Part 2: How would your analysis change if you assumed 3% inflation per year?
Assignment Part 3: If investment one was riskier than investment two, how would your calculations change so that additional risk is taken into account? Also, does this new information change your project preference?
Present your findings in the form of a spreadsheet, and include a three-page written report describing your findings, assumptions, and rationale
Expert Answer:
To determine the preferred investment between Investment One and Investment Two I will calculate the Net Present Value NPV of each investment using a discount rate of 5 NPV helps us assess the profita... View the full answer
Introduction To Mathematical Statistics
ISBN: 9780321794710
7th Edition
Authors: Robert V., Joseph W. McKean, Allen T. Craig
