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Suppose that you have the option to purchase a manufacturing plant as an investment. This investment will produce a $10,000 cash flow in year 1,
Suppose that you have the option to purchase a manufacturing plant as an investment. This investment will produce a $10,000 cash flow in year 1, $2,500 cashflows in years 2 through 4, and then will pay a steady stream of $1,250 cash flows into the foreseeable future (i.e. forever). Also, your firm has a weighted average cost of capital of 10%. What is the present value for this investment?
a. | $23,280.52 | |
b. | $23,932.46 | |
c. | $28,159.92 | |
d. | $35,659.14 |
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