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2. (25 points) (a) (10 points) An investment P is made for 10 years. It costs $100,000 today (11-102020) and starts to return $5,000 every

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2. (25 points) (a) (10 points) An investment P is made for 10 years. It costs $100,000 today (11-102020) and starts to return $5,000 every year starting next year (11- 10-2021). A lump sum amount of $20,000 is also returned once the investment is matured after 10 years. Draw the cash ow diagram and calculate the annual cost for this investment (using annual cost method). Assume rate of interest to be 4% annual. (b) (10 points} Another investment Q is made for 5 years which has an initial invest ment of $50,000 made today (1110-2020) and returns $10,000 every year starting next year (11-10-2021). Draw the cash ow diagram and calculate the annual cost for this investment. Assume rate of interest to be 4% annual. (C) (5 points) Consider the two investment options given (investment P and investment Q). If you have sufcient money to make only one investment, which option should you pick and why

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