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You have just been hired as a consultant to help a firm to decide which of three options to take to maximize the value
You have just been hired as a consultant to help a firm to decide which of three options to take to maximize the value of the firm over the next three years. The following table shows year-end profits for each option. Interest rates are expected to be stable at 8 percent over the next three years. Option A Profits in Year 1 Profits in Year 2 Profits in Year 3 $70,000 $80,000 $90,000 B $50,000 $90,000 $100,000 $100,000 $115,000 a. C $30,000 Discuss the difference in the profits associated with each option. Provide an example of real-world options that might generate such profit streams. b. Which option has the greatest present value? Explain in detail why.
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