Your company is interested in having a new facility constructed
Question # 00477443
Posted By:
Updated on: 02/04/2017 08:21 PM Due on: 02/05/2017
Your company is interested in having a new facility constructed. The contractor expects that it will take approximately 3 years to complete the building. The contractor has offered you three payment plans for the building. They are as follows:
Time | Plan 1 | Plan 2 | Plan 3 |
Today | $7,200,000 | $10,800,000 | $0 |
1 year from now | $23,400,000 | $0 | $39,150,000 |
2 years from now | $23,400,000 | $34,200,000 | $0 |
3 years from now | $23,400,000 | $34,200,000 | $39,150,000 |
The CFO of your company has asked you to provide recommendation concerning which payment plan to accept. What is your recommendation? Assume your weighted-average cost of capital is 14%.
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Rating:
/5
Solution: Your company is interested in having a new facility constructed