Investment A costs $6,000 today and pays back $8,000each year for six years. Investment B costs $6,000 today and pays back $9,000 the first year, with a $500 increase annually, making the second year $9,500, third year $10,000 and so forthfor six years. If an interest rate of 10% is used, which alternative is superior?

Investment B

Explanation:

In this question we need to compare the net present value which is shown below:

For Investment A, the net present value is  

= -$6,00 + $8,000 ÷ 1.10^1 + $8,000 ÷ 1.10^2 + $8,000 ÷ 1.10^3 + $8,000 ÷ 1.10^4 + $8,000 ÷ 1.10^5 + $8,000 ÷ 1.10^6

= $28,842.09

For investment B, the net present value is

= -$6,000 + $9,000 ÷ 1.10^1 + $9,500 ÷ 1.10^2 + $10,000 ÷ 1.10^3 + $10,500 ÷ 1.10^4 + $110,00 ÷ 1.10^5 + $11500 ÷ 1.10^6

= $38,039.43

As we can see that the investment B has highest net present value as compared to the investment A

Therefore, investment B is superior

15 1/2 years old in california

muslims control the north africa during the period of 1500 up

to 1800. they made a barrier to prevent further european exploration from

entering the africa from the north. however, the dutch ware still able to move

toward the interior with having south africa as one of the routes leading to

the east for trading with asia.