An investor is considering two projects: (a) The first project requires an investment of $10,000...
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Finance
An investor is considering two projects:
(a) The first project requires an investment of $10,000 now. In return the investor will receive six annual payments of $2,100, the first of which will be done one year after the investment.
(b) The second project also requires an investment of $10,000 now, but it requires a further investment of $2,500 one year later. In return, the investor will be paid $8,500 in four years time and another $8,500 in seven years time.
Compute the net present values of both investments, on the basis of an interest rate of 4%. Which is the better investment based on this computation?
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