Homework Answers
Total opportunity cost of investment A = 4000(1 + 0.06)20 = 3.2071 × 4000 = 12828
Net benefit = 7330 - 12828 = -5498
Total opportunity cost of investment B = 2000(1 + 0.06)20= 6414.2
Net benefit = 47000 - 6414.2 = 40585.8
Total opportunity cost of investment C = 6000 (1 + 0.06)20= 19242.6
Net benefit = 8730 - 19242.6 = -10512.6
Total opportunity cost of investment D = 1000(1 +0.06)20 = 3207.1
Net benefit = 1340 - 3207.1 = - 1867.1
Total opportunity cost of investment E = 9000(1+0.06)20= 28863.9
Net benefit = 9000- 28863.9 = -19863
Total opportunity cost of investment F = 10000(1+0.06)20 = 32071
Net benefit = 9500 - 32071 = - 22571
Since the net benefit is negative in all investments except B, B is the best alternative.
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