Venture Company has two independent investment opportunities,each requiring an initial outflow of $35,000.The cash inflows for each investment are provided below.
$\begin{array}{ccc}
& \text { Investment A } & \text { Investment B } \
\text { Year 1 } & \$ 50,000 & \$ 40,000 \
\text { Year 2 } & 40,000 & 40,000 \
\text { Year 3 } & 40,000 & 40,000 \
\text { Year 4 } & 30,000 & 40,000 \
\text { Total inflows } & \$ 160,000 & \$ 160,000 \
\hline
\end{array}$
Without making any calculations,which investment will have the higher net present value?

Question

Venture Company has two independent investment opportunities,each requiring an initial outflow of $35,000.The cash inflows for each investment are provided below.
$\begin{array}{ccc} 
& \text { Investment A } & \text { Investment B } \
 \text { Year 1 } & \$ 50,000 & \$ 40,000 \
\text { Year 2 } & 40,000 & 40,000 \
\text { Year 3 } & 40,000 & 40,000 \
\text { Year 4 } & 30,000 & 40,000 \
\text { Total inflows } & \$ 160,000 & \$ 160,000 \
\hline
\end{array}$
Without making any calculations,which investment will have the higher net present value?

Quizplus · Accepted Answer

Investment A will have a higher net present value because it generates larger cash inflows in the earlier years, allowing for a higher present value due to the time value of money.

Venture Company Has Two Independent Investment Opportunities,each Requiring an Initial