A firm has four different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B will give the firm $5 million at the end of one year, $10 million at the end of two years, and $15 million at the end of three years. Option C will give the firm $15 million at the end of one year,
$10 million at the end of two years, and $5 million at the end of three years. Option D will give the firm $21 million at the end of one year, nothing at the end of two years, and $9 million at the end of three years. Which of these options has the highest present value if the rate of interest is 5 percent?
a. Option A
b. Option B
c. Option C
d. Option D
d
You might also like to view...
How does private information create adverse selection and moral hazard?
What will be an ideal response?
Corporations have the advantage of
a. double taxation. b. limited liability of the stockholders. c. no taxes. d. limited life.
Which of the following involves banks borrowing funds from firms or other banks using the value of underlying securities as collateral?
A) federal funds B) repurchase agreement C) counterparty lending D) money market account
Most businesses in the United States are ________, and the type of business organization that accounts for the LEAST amount of total revenues is ________
A) proprietorships; partnerships B) corporations; proprietorships C) proprietorships; proprietorships D) corporations; partnerships