Decision making. A group of entrepreneurs is consid- ering the purchase of an online business. Firm A pre- dicts that it will bring in a constant revenue stream of $80,000 per year for 10 yr. Firm B predicts that it will bring in a constant revenue stream of $95,000 per year for 8 yr. Based on a comparison of accumulated present values, which firm is the better buy, assuming the inter- est rate is 4.1%, compounded continuously, and both firms have the same purchase price?

Decision making. A group of entrepreneurs is consid- ering the purchase of an online business. Firm A pre- dicts that it will bring in a constant revenue stream of $80,000 per year for 10 yr. Firm B predicts that it will bring in a constant revenue stream of $95,000 per year for 8 yr. Based on a comparison of accumulated present values, which firm is the better buy, assuming the inter- est rate is 4.1%, compounded continuously, and both firms have the same purchase price?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EB: Caduceus Company is considering the purchase of a new piece of factory equipment that will cost...

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