Question
Your friend wants to borrow $10,000 from you and gives you three options for repayment. Assuming a discount rate of 5%, which of the following
Your friend wants to borrow $10,000 from you and gives you three options for repayment. Assuming a discount rate of 5%, which of the following options should you choose?
Option A: $12,000 lump sum paid 4 years from now
Option B: $11,500 lump sum paid 3 years from now
Option C: $1,000 a year for the next 10 years
Group of answer choices
b) Option B because it is the highest NPV
e) You should not lend the money because all the options are negative NPV investments
a) Option A because it is the highest NPV
c) Option C because it is the highest NPV
d) You are indifferent because they all have the same NPV
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