(a) The conventional payback period for option A is 3 years. (Round to the nearest whole number place.) The conventional payback period for option B is 4 years. (Round to the nearest whole number place.) Which of these options would you choose based on the conventional payback criterion? Choose the correct answer below. O A. Option B B. Both options are equally likely C. Option A (b) The present worth of the option A is $ 906. (Round to the nearest dollar.) The present worth of the option B is $?. (Round to the nearest dollar.)
(a) The conventional payback period for option A is 3 years. (Round to the nearest whole number place.) The conventional payback period for option B is 4 years. (Round to the nearest whole number place.) Which of these options would you choose based on the conventional payback criterion? Choose the correct answer below. O A. Option B B. Both options are equally likely C. Option A (b) The present worth of the option A is $ 906. (Round to the nearest dollar.) The present worth of the option B is $?. (Round to the nearest dollar.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You are considering two investment options. In option A, you have to invest $4,500 now and $700 three years
from now. In option B, you have to invest $3,700 now, $1,900 a year from now, and $900 three years from now. In
both options, you will receive four annual payments of $1,800 each. (You will get the first payment a year from
now.) Which of these options would you choose based on (a) the conventional payback criterion, and (b) the
present worth criterion, assuming 8% interest? Assume that all cash flows occur at the end of a year.
Click the icon to view the interest factors for discrete compounding when i = 8% per year.
.....
(a) The conventional payback period for option A is 3 years. (Round to the nearest whole number place.)
The conventional payback period for option B is 4 years. (Round to the nearest whole number place.)
Which of these options would you choose based on the conventional payback criterion? Choose the correct
answer below.
O A. Option B
O B. Both options are equally likely
C. Option A
(b) The present worth of the option A is $ 906. (Round to the nearest dollar.)
The present worth of the option B is $?. (Round to the nearest dollar.)
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