YEAR CASH FLOW FROM INVESTMENT 1 INVESTMENT 2 INVESTMENT 3 CASH FLOW CASH FLOW FROM FROM 1. $ 1,000 $ 7,000 $ 10,000 2 1,000 6,000 5,000 3 3,000 5,000 3,000 4 15,000 4,000 2,000 3,000 4,000 1,000 1,000 4,000 1,000 7 4,000 1,000 8 1,000 2,000 1,000 n6

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Evaluate the following capital investments according
to net present value. Each alternative requires an initia l investment
of $20,000. Assume a I 0% cost of capital. Which is the preferred
investment?
YEAR
CASH FLOW
FROM
INVESTMENT 1 INVESTMENT 2 INVESTMENT 3
CASH FLOW
CASH FLOW
FROM
FROM
1.
$ 1,000
$ 7,000
$ 10,000
2
1,000
6,000
5,000
3
3,000
5,000
3,000
4
15,000
4,000
2,000
3,000
4,000
1,000
1,000
4,000
1,000
7
4,000
1,000
8
1,000
2,000
1,000
n6
Transcribed Image Text:YEAR CASH FLOW FROM INVESTMENT 1 INVESTMENT 2 INVESTMENT 3 CASH FLOW CASH FLOW FROM FROM 1. $ 1,000 $ 7,000 $ 10,000 2 1,000 6,000 5,000 3 3,000 5,000 3,000 4 15,000 4,000 2,000 3,000 4,000 1,000 1,000 4,000 1,000 7 4,000 1,000 8 1,000 2,000 1,000 n6
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