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can u explain abcd? The required return of a building project is 10%, given as an effective annual rate. Assume that the cash flows shown
can u explain abcd?
The required return of a building project is 10%, given as an effective annual rate. Assume that the cash flows shown in the table are paid all at once at the given point in time. The building firm is just about to start the project and the client has signed the contract. Initially the firm will pay $100 to the sub-contractors to carry out the work and then will receive an $11 payment from the client in one year and $121 when the project is finished in 2 years. Ignore credit risk. But the building company is considering selling the project to a competitor at different points in time and is pondering the minimum price that they should sell it for. Project Cash Flows Time (yrs) Cash flow ($) 0 -100 1 11 2 121 Which of the below statements is NOT correct? The project is worth: (a) $10 at t=0, just before the $100 is paid. X(b) $110 at t=0, just after the $100 cost is paid. (C) $121 at t=1, just before the $11 revenue is received. (d) $110 at t=1, just after the $11 is received. (e) $60.5 at t=1.5, one and a half years after commencing the projectStep by Step Solution
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