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Assuming that the rate of return on investment

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A lifestyle investment company has following two options: The first investment option costs $65,000, is a perpetuity and pays $10,000 a year (in perpetuity) from year 3 on wards. The second investment costs $60,000 and pays the following cash flows in years 2 to 7:  Yr 2: $15,000, Yr 3: $16,000, Yr 4: $17,000, Yr 5: $18,000, Yr 6: $19,000 and Yr 7: $20,000. Which of these investments are good investments, assuming that the rate of return on investment is 13% p.a. for your client.

Reference no: EM132100144

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