Question
Your company has been offered a contract for the development and delivery of a solar powered military troop transit vehicle. The request for proposal provides
Your company has been offered a contract for the development and delivery of a solar powered military troop transit vehicle. The request for proposal provides all the necessary technical specifications and it also stipulates that two working, economically feasible prototypes must be delivered in four years, at which time you will receive your only customer payment-- a single and final payment of $50 million. Assume a reinvestment interest rate of 18% for all the monies received over the next four years (you may ignore income taxes). a. What lump sum dollar amount would you be willing to accept today instead of the $50 million in four years? b. Alternatively, what four yearly receipts, starting a year from now would you be willing to accept?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started