You are considering two investment options. In option A, you have to invest $7,000 now and $1,200 three years from now. In option B, you have to invest $3,100 now, $1,700 a year from now, and $900 three years from now. In both options, you will receive four annual payments of $2,100 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 12% 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 = 12% per year. (a) The conventional payback period for option A is years. (Round to the nearest whole number place.)

You are considering two investment options. In option A, you have to invest $7,000 now and $1,200 three years from now. In option B, you have to invest $3,100 now, $1,700 a year from now, and $900 three years from now. In both options, you will receive four annual payments of $2,100 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 12% 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 = 12% per year. (a) The conventional payback period for option A is years. (Round to the nearest whole number place.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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