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Evergreen Company Has Two Investment Opportunities Select the Correct Statement

Question 5

Multiple Choice

Evergreen Company has two investment opportunities.Both investments cost $5,000 and will provide the same total future cash inflows.The cash receipt schedule for each investment is given below:  Investment I  Investment II  Period 1 $1,000$3,000 Period 2 1,0002,000 Period 3 2,0002,000 Period 4 4,0001,000 Total $8,000$8,000\begin{array}{|l|r|r|}\hline & \underline{\text { Investment I }} &\underline{ \text { Investment II }} \\\hline \text { Period 1 } & \$ 1,000 & \$ 3,000 \\\hline \text { Period 2 } & 1,000 & 2,000 \\\hline \text { Period 3 } & 2,000 & 2,000 \\\hline \text { Period 4 } & \underline{4,000} & \underline{1,000} \\\hline \text { Total } & \underline{\$ 8,000} & \underline{\$ 8,000} \\\hline & & \\\hline\end{array} Select the correct statement.


A) Evergreen should choose Investment I because of the time value of money.
B) Evergreen should choose Investment II because it generates more immediate cash inflows.
C) Evergreen should be indifferent between the two investments because they provide the same total cash inflows.
D) Time value of money techniques are not useful for comparing these investments.

Correct Answer:

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