Question
Question 3 John has come to you, as his financial advisor, in regard to three investments he is considering investing in. Johns required rate of
Question 3
John has come to you, as his financial advisor, in regard to three investments he is considering investing in. Johns required rate of return for such investments is 10%. The cost of each investment and the income streams generated are summarised below:
| Investment 1 | Investment 2 | Investment 3 | |
| Initial Investment | $18,000 | $20,000 | $21,000 |
| Income Stream | Income Stream | Income Stream | |
| End of Year | |||
| 1 | $6,000 | $8,000 | $7,500 |
| 2 | $6,000 | $6,000 | $7,500 |
| 3 | $8,000 | $4,000 | $7,500 |
| 4 | $7,000 | $5,000 | $7,500 |
Required
What is the net present value of each of the investments John is considering investing in and which (if any) of the three investments would you recommend John invest in?
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Accounting Tools for Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
5th edition
9780470418239, 470239808, 9780470239803, 470418230, 978-1118128169
