The cash flow of each is as suppose the risk of the project

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Bob Davies must decide whether to invest $100,000 in his own business or in another local business. Both investment projects have an expected life of five years. The cash flow of each is as follow:

Year

Davies

Other

$20,000

$10,000

$30,000

$10,000

$40,000

$30,000

$10,000

$40,000

$5,000

$50,000

Suppose the risk of the projects is the same and is accounted for by a risk premium of 6 percent per year. Would either investment make sense? Which would be better?

Reference no: EM13183772

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