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Problem No.1 (Choice between alternatives / NPV) My friend's boss just insured her life for $ 2 million payable to him as a lump sum
Problem No.1 (Choice between alternatives / NPV) My friend's boss just insured her life for $ 2 million payable to him as a lump sum upon her death. This presents him with two clear alternatives: He could have her killed tomorrow and receive the cash or he could continue to let her generate cash flow for the business. My friend estimates she will generate a relatively uniform cash flow of $ 500,000 per year over the next 5 years. How soundly should she sleep tonight? Evaluate the alternatives at an annual interest rate of 5 percent over the 5 year period
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