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    Considering investment alternatives

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    Consider two investment alternatives with the following projected cash flows.

    -Investment #1 (Year 1 is $10,000, Year 2 is $10,000, Year 3 is $10,000).
    -Investment #2 (Year 1 is $0, Year 2 is $10,000, Year 3 is $25,000).

    Can we assume that Investment 2 is preferable because its total cash flow over the three-year period is higher? What additional information is needed to make an informed choice between these investments?

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    Solution Preview

    Hi there,

    A few things to consider:
    1) What is the market interest rate over the course of these three years? If interest rates are really high, then it would ...

    Solution Summary

    The expert determines which investment is preferable. The informed choice between the investments are given.