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Apple Inc. is evaluating two investment options. Option A requires an initial investment of $50,000 and promises to generate cash flows of $15,000 annually for
Apple Inc. is evaluating two investment options. Option A requires an initial investment of $50,000 and promises to generate cash flows of $15,000 annually for 6 years. Option B requires an initial investment of $60,000 and generates cash flows of $12,000 annually for 8 years. Using a discount rate of 8%, compare the net present value (NPV) of both options in the table below:
Investment Option | Initial Investment | Annual Cash Flows | Maturity (Years) | NPV (at 8%) |
Option A | $50,000 | $15,000 | 6 | |
Option B | $60,000 | $12,000 | 8 |
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