Please answer it with solution

Question

A young professional lady would like to invest money for savings. As consultant, she asked you which of the
two companies is better to invest money. Company A requires P25, 000 initial investment and P1,250
increase every year while Company B requires P20, 000 starting investment and P1,400 increase per annum.
Which company will you recommend? Why? 

Answer 1

If I understand this correctly:

Investment with company A returns P1,250 per year on P25,000

Investment with company B returns P1,400 per year on P20,000

 

How many years before the 20,000 investment in company B

would be worth more than the 25,000 investment in company A?

 

20,000 + 1,400y > 25,000 + 1,250y   where y = # years

1400y - 1250y > 25,000 - 20,000

150y > 5000

y > 33 1/3

 

It would take 33 years 4 months for the investment in company B

to be worth more than the investment in company A.

 

I would recommend company A unless one is looking at the very long term.