Alison Has $5,000 to Invest and Is Trying to Decide

Multiple Choice

Alison has $5,000 to invest and is trying to decide between two investment opportunities. One investment offers her future cash flows of $2,000 for each of the next five years. Another investment offers her future cash flows of $5,000 in the fifth year and $7,500 in the sixth year. Alison will need to calculate the _____ of the future cash flows to compare these two investments.

A) common payout value
B) average annual payout
C) fixed annuity value
D) net present value