At what rate of return are the two alternatives equivalent

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Question - In his will, Frank's uncle has given Frank the choice between two alternatives:

Alternative 1 $2000 cash

Alternative 2 $150 cash flow plus $100 per month for 20 months beginning the first day of next month.

(a) At what rate of return are the two alternatives equivalent?

(b) If Frank thinks the rate of return in (a) is too low, which alternative should he select?

Reference no: EM132162307

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