Wonda Munro just won a lottery and received a cash award of $450,000 net of tax. She is 61 years old and would like to retire in four years. Weighing this important fact, she has found two possible investments, both of which require an immediate cash payment of $360,000. The expected cash inflows from the two investment opportunities are as follows:
Ms. Munro decided that her required rate of return should be 10 percent.
Required
Round your computations to two decimal points.
a. Compute the of each opportunity. Which should Ms. Munro choose based on the approach?
b. Compute the for each opportunity. Which should Ms. Munro choose based on the payback approach?
c. Compare the approach with the payback approach. Which method is better in the given circumstances?
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