Question

You are considering two investment options. In option A, you have to invest $4500 now and...

You are considering two investment options. In option A, you have to invest $4500 now and $1000 three years from now. In option B, you have to invest $3500 now, $1000 a year from now, and $1000 three years from now. In option A, you will receive four annual payments of $2000 each (you will get the first $2000 payment a year from now).

In option B, you will receive a payment equal to $4000 at the beginning of year 3.

Which of these two options would you choose based on AE criterion? Assume the interest rate is 10%.

Note: find the AE for both projects. Show your calculations.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Project A should be selected

If you are satisfied with a answer plz upvote thank

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider two investment options, A and B. For option A you must invest $5,000 now and...
Consider two investment options, A and B. For option A you must invest $5,000 now and an additional $1,000 three years from now. For option B you must invest $3,500 now, $1,500 next year, and $1000 three years from now. In both cases you will receive four annual payments of $2,000, the first of these payments one year from now. Which option would you prefer using a) simple payback method b) discounted payback method, assuming a MARR of 10% c)...
Suppose you can choose one of the following two options:  Option A: Receive $25 per...
Suppose you can choose one of the following two options:  Option A: Receive $25 per year for 25 years with the first payment in year 5.  Option B: Receive $X per year forever with the first payment this year. Solve for X that makes you indifferent between these options. r = 5%. SHOW WORK
You have $100 and think where to invest your money. You have three options. Option A...
You have $100 and think where to invest your money. You have three options. Option A promises you a weekly interest rate of 0.3%, compounded weekly. Option B promises a 16% annual interest rate with one payment at the end of each year. Finally, option C has a quoted annual rate of 15% with quarterly compounding. Assume that a year consists of 52 weeks. (a) (3 points) What are APRs of the three investment opportunities? (b) (6 points) Rank these...
You receive $10,000 now for an investment that will give you cash flows of $1000 in...
You receive $10,000 now for an investment that will give you cash flows of $1000 in one year, $2000 in two years, $3000 in three years, and $4000 in four years. If the discount rate is 5% then what is the PV of this investment? (Enter the answer in dollar format without $ sign or thousands comma -> 3519.23 and not $3,519.23 or 3,519.23)
. . You have a debt with two payment options. Option 1 is to pay $3000...
. . You have a debt with two payment options. Option 1 is to pay $3000 in one year from today, $5,000 in two years from today, and $8,000 in three years from today. Option 2 is to pay $15,000 today. Demonstrate which is the better option for you if money is worth 5.00 % p.a. simple interest. Don’t forget to state which is the better option for you ( 10 points) show your caculation by BAII plus caculator.You are...
You are buying a new car that sells for $28,000. You have two options: Option one...
You are buying a new car that sells for $28,000. You have two options: Option one is to finance the entire cost @ 1.5 % for 5 years. The other option is to take a rebate of $2000 and finance the remainder at 6.5 % for 5 years. You are trading in a vehicle that has monthly payments of $385.94 with 2.5 years left on the loan @ 6% APR. They will give you $8000 in trade – in. Which...
(i) You are given the following options: Alternative 1: Receive 10 years from now a single...
(i) You are given the following options: Alternative 1: Receive 10 years from now a single payment of 75,000. Alternative 2: Receive 10,000 each year for 5 years, the first payment now. Alternative 3: Receive 25,000 now and the same amount 5 years from now. Suppose the interest rate is 5% per annum. Which option is the best?
1.   You have just received some great news from your parents… they are going to give...
1.   You have just received some great news from your parents… they are going to give your inheritance early, starting now! But, they’re going to force to you make a decision on how you want it. At the end of the day, they are going to give you a total of $500,000. But you have to pick one of the two options for disbursement: Option A: You get it in three lump sum payments as follows: •   You receive $100,000...
You need to take a loan of $1,500. You have two repayment options: - Option 1:...
You need to take a loan of $1,500. You have two repayment options: - Option 1: Short-term 6% interest loan with a term of 1 year - Option 2: 1-year simple interest amortized loan at 6% interest, monthly payments Calculate the lump sum payment for plan A. Then calculate the monthly payment for plan B. Explain how you arrived at your answer.
1) Congratulations, you just bought a new jacuzzi!   You have two payment options. Option 1 is...
1) Congratulations, you just bought a new jacuzzi!   You have two payment options. Option 1 is to pay $3000 in one year from today, $5,000 in two years from today, and $8,000 in three years from today. Option 2 is to pay $15,000 today. Demonstrate which is the better option for you if money is worth 5.00 % p.a. simple interest. Don’t forget to state which is the better option for you *Please use financial calculator method and show the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT