Question
A large company is conducting an auction for a joint project involving oil exploration. Because of a desire for U.S. dollars, they require the winning
A large company is conducting an auction for a joint project involving oil exploration. Because of a desire for U.S. dollars, they require the winning bidder to make an upfront, one-time payment for the rights to join the project and supervise the work. The company will use the proceeds to cover all of the expenses during the life of the project. The winning bidder will receive a single payment at the end of the ten-year life of the project. This payment, based on the amount of the winning bid, will pay either simple interest of 15 percent annually or 10 percent annually compounded quarterly. Which payment type should a winning bidder choose?
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