Comparing Initial Investments $2.0- 1.5- (in 1.0- millions) 0.5- 10 -0 20 30 40 50 Year Investment 1: $1,000 initial investment, $1,000 annually thereafter Investment 2: $50,000 total initial investment

Comparing Initial Investments $2.0- 1.5- (in 1.0- millions) 0.5- 10 -0 20 30 40 50 Year Investment 1: $1,000 initial investment, $1,000 annually thereafter Investment 2: $50,000 total initial investment

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 19E

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Question

Using the graph below as a reference, explain why an initial investment of $50,000 leads to a larger future value than investing $1,000 each year for the next 50 years.

Also consider when a larger initial investment may not be a viable option, what alternatives are there to grow the value of your investment.

Comparing Initial Investments
$2.0-
1.5-
(in
1.0-
millions)
0.5-
10
-0
20
30
40
50
Year
Investment 1:
$1,000 initial investment,
$1,000 annually thereafter
Investment 2:
$50,000 total initial
investment

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