Question
Richard Ramirez is considering investing in either ABC or ZYX. Both investments ABC and ZYX cost $11,000. In order to make the purchase, Richard Ramirez
Richard Ramirez is considering investing in either ABC or ZYX. Both investments ABC and ZYX cost $11,000. In order to make the purchase, Richard Ramirez needs to obtain a loan from the bank at an interest rate of 8%. The bank is only willing to offer Richard Ramirez $11,000. The following table outlines the expected net cash flows from each investment.
Year | ABC | ZYX |
1 | $600 | $9,600 |
2 | $1,400 | $5,700 |
3 | $3,800 | $3,600 |
4 | $6,600 | $1,800 |
5 | $9,200 | $900 |
Total | $21,600 | $21,600 |
Based on the NPV method, which investment should Richard Ramirez purchase? Do not enter dollar signs or commas in the input boxes. Use the negative sign for a negative NPV. Use the PV tables in the appendix of the textbook. Round your answers to the nearest whole number. NPV of Investment ABC: $Answer NPV of Investment ZXY: $Answer Better Investment: AnswerABCZYX
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