Question

Mr. Budi is a Finance Director of a trading company. He must choose three investment alternatives below. Each asset is expected to generate returns for three years according to the table below:

Year	Asset 1	Asset 2	Asset 3
1	10,500	4,500	7,500
2	8,500	7,500	7,500
3	3,500	10,500	7,500

Based on the achievement of the maximum goal, which one should the financial manager choose? And why?

Answer 1

As per the question, all the three invetment alternatives are giving the same amount of return i.e 22,500

Year	Asset1	Asse2	Asset3
1	10,500	4500	7500
2	8500	7500	7500
3	3500	10500	7500
Total	22500	22500	22500

So, in all cases, 22,500 is the return. In order to decide 1 out of 3 alternatives, Mr Budi should go for Asset 1 because it is giving highest return in the initial years. Although all the alternatives are giving total return as 22,500 but the earlier the return is received, it is better. So, Asset 1 is the best