Consider the stream of unequal cash flows from two investments in the
table below The initial outlay for both investments is $100,000 Ye Investment Investment
ar A Cash Flow B Cash Flow 0 $(100,000) $(100,000) 1 $20,000 $10,000 2 $(10,000) $50,000 3 $50,000 $40,000 4 $40,000 $(20,000) 5 $30,000 $40,000 (a) Calculate the present value (PV) of each investment with a 5% discount
(b) Assuming a 5% discount rate, which investment would you prefer?
Explain your answer
(c) In each investment, how long would it take to recover the initial outlay?
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