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Suppose you have just been employed as a consultant to help a company decide which of 3-options to take to maximize the value of the company 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 3 years.

Option Profits in Year 1 Profits in Year 2 Profits in Year 3
A $70,000 $80,000 $90,000
B $50,000 $90,000 $100,000
C $30,000 $100,000 $115,000

Which option has the greatest present value?

 

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9311323

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