Financial Investment

Assume that your firm is attempting to choose from between two project options Project A offers the following opportunities: $450,000 invested today (year 0) will yield an expected stream of income of $150,000 per year for five years (ie years 1 to year 5); there is no return in year 0 Project B requires an initial investment of $400,000 (year 0), but its expected revenue stream is:

Year 0 – $0
Year 1 – $0
Year 2 – $100,000
Year 3 – $200,000
Year 4 – $300,000
Year 5 – $200,000

Using payback period as the only selection criteria, which is the better investment?

Project A

Project B

Assume the following newest probabilities P(customer makes a purchase)= 0250, P(customer does not make a purchase) = 1-0250, compute the P(1 purchase), and enter your answer in 3 decimal places

Assume the following newest probabilities:

P( Customer makes a purchase)= 0450

P( Customer does not make a purchase)= 1 – 0450

Compute the P(1 purchase ), and enter your answer with 3 decimal places

Solution: