You have a small recycling business. A competitor has promised you to buy your business any time in the next 2 years for the amount of CHF 370,000. (If you do not sell she will probably enter the market and crash you out) On the other hand, you have some ideas for short term investments in your business that could yield to some interesting revenue before you sell. These are your options. Option 1: Sell the business right away. Option 2: Invest CHF 36,000 now, generating $47,880 in profit next year and then sell the business at the end of next year. Option 3: Invest CHF 63,000 now, generating profits of CHF 50,400 at the end of both the first and second years, then after 2 years, sell the business. If the discount rate is 6.2%: Format answers (#####.##) i) What is the present value of option 1? 370000 ii) What is the present value of option 2 ? iii) What is the present value of option 3 ? ...
You have a small recycling business. A competitor has promised you to buy your business any time in the next 2 years for the amount of CHF 370,000. (If you do not sell she will probably enter the market and crash you out) On the other hand, you have some ideas for short term investments in your business that could yield to some interesting revenue before you sell. These are your options. Option 1: Sell the business right away. Option 2: Invest CHF 36,000 now, generating $47,880 in profit next year and then sell the business at the end of next year. Option 3: Invest CHF 63,000 now, generating profits of CHF 50,400 at the end of both the first and second years, then after 2 years, sell the business. If the discount rate is 6.2%: Format answers (#####.##) i) What is the present value of option 1? 370000 ii) What is the present value of option 2 ? iii) What is the present value of option 3 ? ...
Chapter1: Introduction To Finance For Entrepreneurs
Section: Chapter Questions
Problem 4EP
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