Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 10

To retain high-performing engineers, a large semiconductor company provides corporate stock as part of the compensation package. In one particular year, the company offered 1000 shares of either class A or class B stock. The class A stock was selling for $30 per share at the time, and stock market analysts predicted that it would increase at a rate of 6% per year for the next 5 years. Class B stock was selling for $20 per share, but its price was expected to increase by 12% per year. At an interest rate of 8% per year, which stock should the engineers select on the basis of a present worth analysis and a 5-year planning horizon