Question
Maryland Lumber is planning to sell its Bel Air South, Aberdeen, and Suitland-Silver Hill stores. The firm expects to sell each of the three stores
Maryland Lumber is planning to sell its Bel Air South, Aberdeen, and Suitland-Silver Hill stores. The firm expects to sell each of the three stores for the same, positive cash flow of $F. The firm expects to sell its Bel Air South store in N years, its Aberdeen store in N years, and its Suitland-Silver Hill store in X years. The cost of capital for the Bel Air South and Aberdeen stores is M percent and the cost of capital for the Suitland-Silver Hill store is I percent. We know that N>X>0 and M>I>0. The cash flows from the sales are the only cash flows associated with the various stores. Based on the information in the preceding paragraph, which one of the following assertions is true?
-The Bel Air South store is the most valuable of the 3 stores
-Two of the three stores have equal value and those two stores are more valuable than the third store or all three stores have the same value
-The Suitland-Silver Hill store is the most valuable of the 3 stores
-The Aberdeen store is the most valuable of the 3 stores
-Cannot be determined based on the information given
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