A business has two investment choices. Alternative 1 requires an immediate outlay of $1,100 and offers a return of $5,000 in eight years. Alternative 2 requires an immediate outlay of $700 in return for which $200 will be received at the end of every six months for the next eight years. The required rate of return on investment is 11% semi-annually. Compute the net present value of each alternative and determine which investment should be accepted or rejected according to the net present value criterion.

ANS:

ALT. 1 NPV= $1023

ALT. 2 NPV= $1392

the preferred alternative is Alt. 2

Note: asking for how to get these solutions from the TI BA II PLUS Financial Calculator. Thank you!