Question

You are considering in investing one of the two options: Investment A requires an upfront payment of $250,000 and generates $155,000 annually, Investment B requires an upfront payment of $310,000. How much should Investment B generate annually so that the total returns from Investment A and B become equal after 4 years?

Answer 1

Investment B should generate $310,000 annually for the total returns from Investment A and B to become equal after 4 years.

Step-by-step explanation:

To find the amount Investment B should generate annually so that the total returns from Investment A and B become equal after 4 years, we need to calculate the total return from Investment A over 4 years and subtract it from the upfront payment of Investment B. This will give us the amount that Investment B should generate annually.

First, calculate the total return from Investment A: $155,000 * 4 = $620,000

Subtract the total return from Investment A from the upfront payment of Investment B: $310,000 - $620,000 = -$310,000

Since the result is negative, it means Investment B would need to generate $310,000 annually for the total returns from Investment A and B to become equal after 4 years.