Daryl Kearns saved $240,000 during the 25 years that he workedfor a major corporation. Now he has retired at the age of 50 andhas begun to draw a comfortable pension check every month. He wantsto ensure the financial security of his retirement by investing hissavings wisely and is currently considering two investmentopportunities. Both investments require an initial payment of$188,500. The following table presents the estimated cash inflowsfor the two alternatives: Year 1 Year 2 Year 3 Year 4 Opportunity#1 $ 55,675 $ 58,780 $ 78,870 $ 101,420 Opportunity #2 103,500109,400 17,800 14,100 Mr. Kearns decides to use his past averagereturn on mutual fund investments as the discount rate; it is 9percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) fromthe tables provided.) Required Compute the net present value ofeach opportunity. Which should Mr. Kearns adopt based on the netpresent value approach? Compute the payback period for eachopportunity. Which should Mr. Kearns adopt based on the paybackapproach? Compute the net present value of each opportunity. Whichshould Mr. Kearns adopt based on the net present value approach?(Round your intermediate calculations and final answer to twodecimal places.) Net Present Value Opportunity 1 Opportunity 2Which opportunity should be chosen? Payback Period Opportunity 1Opportunity 2 Which opportunity should be chosen?
