Calculate the net present value of each of the three hypothetical projects described below. Assume the interest rate is 5% Project A: You receive an immediate payoff of $1,000 Project B: You pay $100 today in order to receive $1,200 a year from now Project C: You receive $1,200 today but must pay $200 one year from noW Which of the three projects would you choose to undertake based on your net present value calculations? Explain. a.

Calculate the net present value of each of the three hypothetical projects described below. Assume the interest rate is 5% Project A: You receive an immediate payoff of $1,000 Project B: You pay $100 today in order to receive $1,200 a year from now Project C: You receive $1,200 today but must pay $200 one year from noW Which of the three projects would you choose to undertake based on your net present value calculations? Explain. a.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5MC

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