Question
Which of the following two investment opportunities is preferred if you have a discount rate of 15%, and why? Investment A: Costs 419 SEK today
Which of the following two investment opportunities is preferred if you have a discount rate of 15%, and why? Investment A: Costs 419 SEK today and provides a positive cash flow of 85 SEK per year forever. Investment B: Costs 572 SEK today and provides a positive cash flow of 95 SEK per year forever. (Answers are rounded to integers)
a) Both investments are equally good
b) Investment B is preferred because it has the highest NPV of 61
c) Investment A is preferred because it has an NPV of 148
d) Investment B is preferred because it has a higher annual cash flow of 95.
e) Investment A is preferred because it has the lowest initial cost of 419.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started