Question

The present cash outflow is $3,000. You want to choose the option that best maximizes on a 10% plus cash inflow over the course of four years. Investment A provides the following cash inflows: year 1 $0, year 2 $0, year 3 $3,000, and year 4 $0. Investment B provides the following cash inflows: year 1 $750, year 2 $750, year 3 $750, and year 4 $1,500. Investment C provides the following cash inflows: year 1 $1,000, year 2 $1,000, year 3 $1,000, and year 4 $1,000. Investment D provides the following cash inflows: year 1 $0, year 2 $0, year 3 0, and year 4 $4,250. Finally, investment E provides the following cash inflows: year 1 $0, year 2 $0, year 3 $2,000, and year 4 $2,250. Which option A, B, C, D, or E is the best investment. Of the options that provide a 10% or better return what distinguishes each and why is this interesting?

Answer 1