Plan I: Spend $94 million today on a factory in Bhaluka, Mymensingh that will be completed in 1 year. You expect to receive $40 million in profits from this factory at the end of the second year, at which time you also expect to sell the factory to Sharp Corporation, a Japanese competitor, for a further $70 million.

Plan II: Spend $120 million today in a joint venture with Jamuna Electronics. You expect to begin generating yearly profits of $13.5 million at the end of the first year and every year thereafter. You expect the joint venture to last forever.

ID:

1

The market interest you could achieve from IDLC Finance if you do not invest in any of the two is 8.5%. Which of the above plans would you undertake if you could undertake just one.