Question
The following information are given for three investment opportunities (A,B,C) which require equal amount of investments at time zero but with different annual net cash
The following information are given for three investment opportunities (A,B,C) which require equal amount of investments at time zero but with different annual net cash inflows on years 1 to 5. Conceptually, which investment is most favorable to the firm considering time value of money? Justify. (15 points)
| A | B | C | |
| TIME 0 | - 4,000,000.00 | - 4,000,000.00 | - 4,000,000.00 |
| Y1 | 1,000,000.00 | 500,000.00 | 1,500,000.00 |
| Y2 | 1,000,000.00 | 800,000.00 | 1,200,000.00 |
| Y3 | 1,000,000.00 | 1,000,000.00 | 1,000,000.00 |
| Y4 | 1,000,000.00 | 1,200,000.00 | 800,000.00 |
| Y5 | 1,000,000.00 | 1,500,000.00 | 500,000.00 |
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Investment Science
Authors: David G. Luenberger
2nd Edition
0199740089, 978-0199740086
