A Firm Has Three Different Investment Options

question 160

Multiple Choice

A firm has three 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 $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 C will give the firm $30 million at the end of one year, and nothing thereafter. Which of these options has the highest present value?

• A)Option A
• B)Option B
• C)Option C
• D)The answer depends on the rate of interest, which is not specified here.

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Definitions:

Prototype

An original model or initial version of something from which other forms are copied or developed.

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A waterfowl of the family Anatidae, known for its long neck, webbed feet, and often migratory behavior.

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The largest living bird species, native to certain large areas of Africa, known for its speed and ability to lay large eggs.