Question
Good Society is considering two 4-year investment opportunities. Option A is to buy a machine A now and pay $4,500 today, $300 at the end
Good Society is considering two 4-year investment opportunities. Option A is to buy a machine A now and pay $4,500 today, $300 at the end of the first, second, third year, and $1,000 in the last year. Option B is to buy a machine B now and pay $3,646 today, and $200 for the next years. Assume an annual discount rate of 9% (please show calculations and in the explanation include the method you used to evaluate the investments).
Year | 1 | 2 | 3 | 4 |
Cash inflows Option A | $2000 | $2000 | $2000 | $2000 |
Cash inflows Option B | $1500 | $1500 | $1000 | $1000 |
Q. Assume that now the director of Good Society knows the cash inflows associated with the two investments (see the following table). Does that information change the response
in (b)? Why?
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