Answer: Investment #2 is better by $7,855.88!, You have to choose between 2 investments. The first investment requires you to pay $1,989,453 three years from now, but it will earn you cash flow every year from the 2nd year to the 6th year; starting with $129,827 on the 2nd year; and this will grow 5% per year for 3 years; plus, you'll get back a lump sum of $1,639,837 on the 6th year. The second investment requires you to pay only $1,873,963 today, and then you'll earn $423,296 beginning 1 year from now and this will continue until the 5th year. Government bond rate stands at 2.3%. You can afford either investment, but can only choose one. With the NPV concept, which is a better investment for you, and by how much is it better? MORE VIDEOS 3:37 / 6:34 YouTube Share # JC

Answer: Investment #2 is better by $7,855.88!, You have to choose between 2 investments. The first investment requires you to pay $1,989,453 three years from now, but it will earn you cash flow every year from the 2nd year to the 6th year; starting with $129,827 on the 2nd year; and this will grow 5% per year for 3 years; plus, you'll get back a lump sum of $1,639,837 on the 6th year. The second investment requires you to pay only $1,873,963 today, and then you'll earn $423,296 beginning 1 year from now and this will continue until the 5th year. Government bond rate stands at 2.3%. You can afford either investment, but can only choose one. With the NPV concept, which is a better investment for you, and by how much is it better? MORE VIDEOS 3:37 / 6:34 YouTube Share # JC

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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