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You have just been hired as a consultant to help a firm determine which of three options to take to increase shareholder wealth. The following

You have just been hired as a consultant to help a firm determine which of three options to take to increase shareholder wealth. The following table shows year-end profits for each option. Assume that the risk-free cost of capital is 5 percent and the risk premium is 8 percent.

Option Profit Yr 1 Profit Yr 2 Profit Yr 3
A 70,000.00 80,000.00 90,000.00
B 50,000.00 90,000.00 100,000.00
C 30,000.00 100,000.00

115,000.00

Calulate the economic profit for each option

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