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You are a financial manager and must choose between three different investments.

You are a financial manager and must choose between three different investments. Each asset is expected to provide earnings over a three-year period as outlined in the table below. Based solely on the information below with the objective of maximizing wealth, which Asset should you select and why?

Year. Asset 1. Asset 2. Asset 3.

1. $21,000. $9,000. $15,000

2. 17,000. 15,000. 15,000

3. 7,000. 21,000. 15,000

45,000. 45,000. 45,000


Solutions

Expert Solution

I will be trying to select Asset1, primary, because of the time value of money because when there are higher cash inflows in At the beginning of the project, the value of the cash inflow the higher due to the concept of the time value of money,& there will be lower discounting applied, so the rest of the two projects are returning most of the cash inflows at the end of their project cycle, so they will not be preferred, and only asset 1, will be preferred by me because it is returning more of the money at the beginning of project life cycle.

ASSET 1 will be selected by me.

jeff jeffy answered 2 years ago
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