Answer:
Investment B
Explanation:
In this question we need to compare the net present value which is shown below:
For Investment A, the net present value is
= -$6,00 + $8,000 ÷ 1.10^1 + $8,000 ÷ 1.10^2 + $8,000 ÷ 1.10^3 + $8,000 ÷ 1.10^4 + $8,000 ÷ 1.10^5 + $8,000 ÷ 1.10^6
= $28,842.09
For investment B, the net present value is
= -$6,000 + $9,000 ÷ 1.10^1 + $9,500 ÷ 1.10^2 + $10,000 ÷ 1.10^3 + $10,500 ÷ 1.10^4 + $110,00 ÷ 1.10^5 + $11500 ÷ 1.10^6
= $38,039.43
As we can see that the investment B has highest net present value as compared to the investment A
Therefore, investment B is superior
