Question
A business enterprise is facing two investment options, A and B. Venture A is expected to generate $100 in exactly one year and venture B
A business enterprise is facing two investment options, A and B. Venture A is expected to generate $100 in exactly one year and venture B is expected to generate $150 in 5 years.
(a) How would you evaluate and compare these investment opportunities?
(b) Further, complete the following table by finding the present values of each venture assuming different interest rates.
(c) Summarize your observations by commenting on what happens to the present value of each investment as interest rate increases, and how different ventures compare in attractiveness as the interest rate rises. Show your work.
Interest Rate\Venture Investment A Investment B
2% ? ?
5% ? ?
12% ? ?
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