Question
Two new opportunities are being considered for a venture capital firm. Both are one-time opportunities with no option for renewal. The firm uses a 10%/year
Two new opportunities are being considered for a venture capital firm. Both are one-time opportunities with no option for renewal. The firm uses a 10%/year expected rate of return for decisions of this type. The relevant characteristics for each option are shown below.
| Option 1 | Option 2 | |||
| Initial Investment | $89,000 | $61,000 | ||
| Estimated Life | 16 years | 12 years | ||
| Expected Annual Return | $16,100 | $14,700 |
| a) What is the present worth of Option 1? b) What is the present worth of Option 2?
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M Finance
Authors: Marcia Cornett, Troy Adair, John Nofsinger
3rd Edition
0077861779, 978-0077861773
