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Now, again, we have to help John with his investment choice.

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He has two options and the first option, he can buy a car for ten thousand dollars.

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Which will give him around two thousand dollars for the next five years and at the end of fifth year,

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he can sell that car for four thousand dollars.

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Now, the second investment opportunity is that he can invest eight thousand dollars today and at the

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end of sixth year he will be getting the development or sixteen thousand dollars for his investment.

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Now, to find out which option is better, we will use both Ayata and MPV to evaluate these options.

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So I have listed a few of the important parameters here, the principal amount or be an option one is

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10000.

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Are our discount rate is zero point zero six or six percent.

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And the salvage value in option one is four thousand dollars, salvage values means this is the amount

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he will receive after the end of the investment term.

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And option B, the B or principal amount is eight thousand dollars.

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The discount rate is the same, which is six percent and the salvage value is zero, at the end of this

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investment term, he will get sixteen thousand dollars.

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But unlike God, there is no option to sell any asset for any further cash or value.

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Now, let's first calculate the IRR for option one.

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So to calculate error, we have to include the initial investment in the formula as well.

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So for the 08 year or for the starting of last year, John is investing ten thousand dollars in option

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one.

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So I will write minus ten thousand.

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In the other one, he will get 2000.

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Now, for the next five year, he will get 2000.

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And for the last year, he will get 2000 plus an additional 4000 for selling the car.

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So in total, at the end of the year, he will get six totaling.

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Now, to calculate accurate.

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We have to just straight equal to Iara.

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Now, if you want help with this formula, you can click on this button Oriya, which will give you

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some more details about the parameters we have to use.

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So for values, we can just select all the cash transactions we have listed over here, so at the Zero

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Theater we are investing 10000 and we are getting this cash inflow for the next two years.

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So just select all the values and enter.

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In some cases, there may be two or more error rates for which we have to use this gas variable, but

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in this case there is only one error rate which is possible.

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So we will ignore the gas parameter.

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But for some complex transactions in which we have some initial investment and then some other investment

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down the road, in those cases we can have multiple layers and we have to use this gas.

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What even.

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But for most of the transactions, you can ignore this parameter.

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So just select all the values and make.

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So this is Diora value.

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Ayata for option one is 10 percent.

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Now, let's calculate the accurate value for our option B.

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And option B as well, our initial investment is eight thousand.

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All right, minus eight thousand minus means investment.

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And then for the next five years, we are not getting anything.

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So this will be zero and the sixth year we are getting 16000.

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Again, to calculate IRR, we can use equal to accurate.

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And then select all this cash flows.

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If we had enter.

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We are getting Ayata for our option B.

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S 12 percent.

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So just by comparing error, you can see that we are getting higher return on our option B.

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We can also calculate the NPV of both of these options for NPV.

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We do not include.

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The initial investment sought to calculate we cannot equal to NPV.

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Then first, the rate is zero point zero six and then the values.

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Here we are not selecting minus 10000 because this was the investment at the start for Ayata.

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We have to select our investment at the site for NPV.

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We don't have to select investment.

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So the NPB in this case is around eleven thousand four hundred and thirteen dollar.

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Now, similarly, we can calculate the NPV for option B as well, we just have to write and bevvy.

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And then we have to select all the cash flows.

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From first to sixth year.

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So the NPV in our option B is eleven thousand two hundred and seventy nine.

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Now, remember an option when we invest 10000.

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And we are getting around eleven thousand four hundred and thirteen an option B, we invested only eight

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thousand and we are getting almost identical amount.

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That is eleven thousand two hundred and seventy nine.

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You can also subtract this investment from this net present value to see how profitable these options

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are.

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So the rate equal to this minus the present value of our investment, that is tantalising.

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And it is coming to be fourteen hundred and thirteen dollars.

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For option to Israel.

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We are getting around three thousand two hundred and seventy nine.

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So clearly, you can see that the net value we are getting from option B is much more than the net value

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we are getting from option A..

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So from both the methods by comparing error and by comparing and NPV, we can say that Option B is much

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better than option A.

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So in this way, you can evaluate multiple investment options, IRR, and we both will tell you which

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one is better investment for you.