Miami Company has $15,000 to invest. Management is trying to decide between two alternative uses for the funds as follows. The company’s discount rate is 16%.
|
Project A |
Project b |
|
|
Investment required |
$15,000 |
$15,000 |
|
Single cash inflow at the end of 10 years |
$0 |
$60,000 |
|
Annual cash inflows |
$4,000 |
$0 |
|
Life of the project |
10 years |
10 years |
Required: Which alternative would the company choose?