Net Present Value

Conrad has $10,000; he is considering whether to (1) invest in a mutual fund with an 8% annual interest rate or (2) remodel his kitchen. If he remodels the kitchen, he will be able to sell his home for an additional $13,000 when he moves at the end of five years. Which of the following statements is TRUE?

The net present value of remodeling the kitchen is –$1,152.42.
Conrad is better off investing his money in the mutual fund.
If Conrad invests in the mutual fund, his money will grow to $10,800 at the end of five years, making this a worse investment than the kitchen remodel.

Select one:
a. I and II
b. II only
c. I only
d. I and III only
Asked Oct 09, 2015

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