An auto-parts company is deciding whether to sponsor a racing team for a cost of $1 million. The sponsorship would last for three years and is expected to increase cash flows by $580,000 per year. If the discount rate is 7.5%, what will be the change in the value of the company if it chooses to go ahead with the sponsorship?

Question 9 options:

1)

$508,305

2)

$740,000

3)

$808,786

4)

$863,000