You have two investment alternatives. Alternative 1 requires an immediate outlay of $8000. In return, you will receive $900 at the end of every quarter for the next three years. Alternative 2 requires an immediate outlay of $2000 and an outlay of $1000 in two years. In return, you will receive $300 at the end of every quarter for the next three years. Interest is 7% compounded quarterly. Which alternative would you choose? Why?
For the investment choices, compute the net present value. Determine investment should be accepted or rejected according to the net present value criterion.