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New Mexico Fashion Stores is planning to sell its Clovis, Farmington, and Enchanted Hills stores. The firm expects to sell each of the three stores
New Mexico Fashion Stores is planning to sell its Clovis, Farmington, and Enchanted Hills stores. The firm expects to sell each of the three stores for the same, positive cash flow of $D. The firm expects to sell its Clovis store in K years, its Farmington store in K years, and its Enchanted Hills store in P years. The cost of capital for the Clovis and Farmington stores is I percent and the cost of capital for the Enchanted Hills store is H percent. We know that K < P > 0 and I < H > 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?
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 Farmington store is the most valuable of the 3 stores | ||
The Enchanted Hills store is the most valuable of the 3 stores | ||
The Clovis store is the most valuable of the 3 stores | ||
Cannot be determined based on the information given |
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