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.
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