Investment
	A	B
Purchase Price	$13,000	$8,500
End of Year	Income Stream
1	$2,500	$4,000
2	$3,500	$3,500
3	$4,500	$3,000
4	$5,000	$1,000
5	$5,500	$500

Kent Weitz wishes to assess whether the following investments are satisfactory:

.

Use his required return (discount rate) of

17 % to evaluate each investment. Make an investment recommendation to Kent.

The present value,

PV,

at the required rate of 17%

for Income Stream A is

$nothing.

(Round to the nearest cent.)

The recommendation to Kent for Investment A is:(Select the best answer below.)

A.

The present value (at

17%

required return) of the income from Investment A, at $12,680.08,

is less than the

$13,000

purchase price. Investment A should not be purchased. Kent will earn less than his required rate of return.

B.

The present value (at

17 %

required return) of the income from Investment A, at 12,680.08,

is less than the

$ 13,000

purchase price. Investment A should be purchased. Kent will earn more than his required rate of return.

The present value,

PV,

at the required rate of

1717%

for Income Stream B is

$nothing.

(Round to the nearest cent.)

The recommendation to Kent for Investment B is:(Select the best answer below.)

A.

The present value (at 17 %required return) of the income from Investment B, at $8,610.42,

is greater than the $8,500

purchase price. Investment B should not be purchased. Kent will earn less than his required rate of return.

B.

The present value (at 17% required return) of the income from Investment B, at $8,610.42,

is greater than the $8,500

purchase price. Investment B should be purchased. Kent will earn more than his required rate of return.