Suleiman Must Make a Choice Between Two Investment Alternatives

question 4

Multiple Choice

Suleiman must make a choice between two investment alternatives. Alternative 1 will provide him returns of $300 000 at the end of second year and $700 000 at the end of fifth year. Alternative 2 will provide him returns $180 000 at the end of each of the next six years. Alternative 3 will provide him returns $370 000 at the end of second, fourth and sixth years. Which alternative is preferable if money is worth 9.4%?

• A) Alternative 1
• B) Alternative 2
• C) Alternative 3
• D) Alternative 2 or Alternative 3, as both are essentially same
• E) Alternative 1 or Alternative 3, as both are essentially same

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Definitions:

Production

The process of creating goods and services from various inputs like labor, capital, and raw materials.

Marginal Cost

The supplementary cost for manufacturing an extra unit of a product or service.

Street Cleaning

The process of removing dirt, litter, and other debris from streets to maintain cleanliness and order in public spaces.

Efficient Number

The optimal quantity that balances benefits with costs in the production of a good or service, aiming for maximum efficiency.