Two new opportunities are being considered for a venture capital firm. Both are one-time opportunities with...
Two new opportunities are being considered for a venture capital
firm. Both are one-time opportunities with no option for renewal.
The firm uses a 11%/year expected rate of return for decisions of
this type. The relevant characteristics for each option are shown
below.
|
Option 1 |
Option 2 |
|||
| Initial Investment | $93,500 | $70,000 | ||
| Estimated Life | 16 years | 13 years | ||
| Expected Annual Return | $16,000 | $15,700 |
|
a) What is the present worth of Option 1? b) What is the present worth of Option 2? |
Homework Answers
The NPV of Option 1 is = $24566.59
The NPV of Option 2 is= $35972.97
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