Determine net present values of each investment alternative

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An investor is deciding between two investment alternatives. Alternative A requires outlays of $50,000 in each year of the first 5 years and net returns of $80,000 are expected in each of years 4, 5, 6, 7 plus a salvage value of $50,000 in year 9. Alternative B requires an outlay of $300,000 in year 2 and net returns of $50,000 are expected in year 5, and every year thereafter. Using an interest rate of 3% c.a, determine the net present values of each investment alternative and determine which investment alternative is the most profitable.

Reference no: EM131066473

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