An Auto-Parts Company Is Deciding Whether to Sponsor a Racing

question 110

Multiple Choice

An auto-parts company is deciding whether to sponsor a racing team for a cost of $1 million.The sponsorship would last for three years and is expected to increase cash flows by $580,000 per year.If the discount rate is 7.5%,what will be the change in the value of the company if it chooses to go ahead with the sponsorship?

• A)$508,305
• B)$740,000
• C)$808,786
• D)$863,000

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