Question
ABD Enterprises is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of $87,900, and the company uses
ABD Enterprises is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of $87,900, and the company uses a 13 percent discount rate. The cash inflows for each investment follow:
| Year | A | B | C | D |
| 1 | $10,000 | $50,000 | $25,000 | $ 0 |
| 2 | 20,000 | 40,000 | 25,000 | 0 |
| 3 | 30,000 | 30,000 | 25,000 | 0 |
| 4 | 40,000 | 0 | 25,000 | 55,000 |
| 5 | 50,000 | 0 | 5,000 | 60,000 |
- Net Present Value
- Calculate the Net Present Value (in whole numbers) for each investment.
- Based on the NPV rule, which investments could you choose?
- Which is the best investment choice based on NPV (choose one investment only)?
- Why did you choose the investment in part b) iii above?
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1st Edition
1974565491, 978-1974565498
