Question 1 [6 Marks]

Two investment opportunities are open to you: Investment 1 and Investment 2. Each has an initial cost of R10,000.

I

investment 1		investment 2
cash flow	year	cash flow	year
5000	1	8000	1
6000	2	7000	2
7000	3	6000	3
8000	4	5000	4

Required:

Assuming that you desire a 10% return on your initial investment, calculate the net present value of the two alternatives options and evaluate their relative attractiveness