Daryl Kearns saved $260,000 during the 25 years that he worked for a major corporation Now he has retired at the age of 50 and has begun to draw a comfortable pension check every month He wants to ensure the financial security of his retirement by investing his savings wisely and is currently considering two investment opportunities Both investments require an initial payment of $185,500 The following table presents the estimated cash inflows for the two alternatives Year 1 Year 2 Year 3 Year 4 Opportunity 1 $ 55,660 $ 58,850 $ 78,940 $ 101,280 Opportunity 2 103,800 109,150 17,900 14,600 Mr Kearns decides to use his past average return on mutual fund investments as the discount rate it is 8 percent (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided ) Required Compute the net present value of each opportunity Which should Mr Kearns adopt based on the net present value approach Compute the payback period for each opportunity Which should Mr Kearns adopt based on the payback approach

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Daryl Kearns saved $260,000 during the 25 years that he worked for a major corporation. Now he has retired at the age of 50 and

Daryl Kearns saved $260,000 during the 25 years that he worked for a major corporation. Now he has retired at the age of 50 and has begun to draw a comfortable pension check every month. He wants to ensure the financial security of his retirement by investing his savings wisely and is currently considering two investment opportunities. Both investments require an initial payment of $185,500. The following table presents the estimated cash inflows for the two alternatives:

	Year 1		Year 2		Year 3		Year 4
Opportunity #1	$	55,660	$	58,850	$	78,940	$	101,280
Opportunity #2		103,800		109,150		17,900		14,600

Mr. Kearns decides to use his past average return on mutual fund investments as the discount rate; it is 8 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required

Compute the net present value of each opportunity. Which should Mr. Kearns adopt based on the net present value approach?
Compute the payback period for each opportunity. Which should Mr. Kearns adopt based on the payback approach?