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A company has a policy of requiring a rate of return on investment of 15%. Two investment alternatives are available but the company may choose
A company has a policy of requiring a rate of return on investment of 15%. Two investment alternatives are available but the company may choose only one. Alternative 1 offers a return of $35,000 at the end of year four, $40,000 at the end of year seven and $50,000 after eleven years. Alternative 2 will return the company $800 at the end of each month for the next eleven years. Compute the present value of each alternative and determine the preferred alternative according to the discounted cash flow criterion.
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