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Take a Test -Oshayne Whittingham-Google Chrome Secure l https//www.mathal.com/Student/playerTestaponestid 572&centerwin-yes; Principles of Business Finance Test:Exam 2 Time Remaining: 02:40.24 Submit Test This Question: 1 pt 35of41 (7complete) This Test: 41 pts possible Assume that two investments have a three-year lfe and generate the cash flows shown below Which of the two would you prefer? Year Investment A $5,000 $5.000 $5,000 lmestment 8,000 $5,000 $2.000 o A. Investment A, since it has the most even cash flows O B. Investment B, since it gives you the largest cash flows in earlier years O C. Neither, since they both have equal lves D. Both investments are equaly attractive

Explanation / Answer

Option B is correct : Investment B since it gives largest cash flows in earlier years.

If we assume any discount rate & calculate Present value it is clear that investment B will give higher Present Value Therefore it should be selected.

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