A financial manager must choose three alternative investments. Each asset is expected to provide earnings over...
A financial manager must choose three alternative investments. Each asset is expected to provide earnings over three-years-period a described below. Based on the wealth goal, the financial manager would choose asset 1 or asset 2 or asset 3? Explain why!
| Year 1 | Asset 1 | Asset 2 | Asset 3 |
| 1 | 10,500 | 4,500 | 7,500 |
| 2 | 8,500 | 7,500 | 7,500 |
| 3 | 3,500 | 10,500 | 7,500 |
Homework Answers
The manager should choose Asset 1. It has the highest cash flows, in the earlier years which means that its present value of earnings and future value of earnings, both (when compared to Assets 2 and 3) would be higher at a given interest rate.
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A financial manager must choose three alternative investments.
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