Question
On 1/1/19 the management team for Expeditions Anonymous is trying to decide which of four investment opportunities to pursue. The expected cash receipts from each
On 1/1/19 the management team for Expeditions Anonymous is trying to decide which of four investment opportunities to pursue. The expected cash receipts from each opportunity are as follows:
- OPTION 1: Receive $85,000 today plus $5,000 at the end of each year for 10 years and an additional $10,000 at the end of the 10th year
- OPTION 2: Receive a one-time amount of $320,000 at the end of 12 years
- OPTION 3: Receive $129,000 today
- OPTION 4: Receive $11,000 semiannually (at the end of each 6-month period) over a period of 8 years
Assuming Expeditions Anonymous uses an interest rate of 8% to evaluate investment opportunities, which of these investments should the company pursue?
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Financial Theory and Corporate Policy
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
4th edition
321127218, 978-0321179548, 321179544, 978-0321127211
