5. A certain manufacturing plant is being sold and was submitted for bidding. Two bids were submitted by interested buyers. The first bid offered to pay 200,000.00 each year for 5 years, each payment being made at the beginning of each year. The second bidder offered to pay 120,000.00 the first year, 180,000.00 the second year and 270,000.00 each year for the next 3 years, all payments being made at the beginning of each year. If money is worth 12 % compounded annually, which bid should the owner of plant accept? ANS. BID 2 MUST BE ACCEPTED; bid 1 = 807,469.87; bid 2 = 859,727.18 %3D
5. A certain manufacturing plant is being sold and was submitted for bidding. Two bids were submitted by interested buyers. The first bid offered to pay 200,000.00 each year for 5 years, each payment being made at the beginning of each year. The second bidder offered to pay 120,000.00 the first year, 180,000.00 the second year and 270,000.00 each year for the next 3 years, all payments being made at the beginning of each year. If money is worth 12 % compounded annually, which bid should the owner of plant accept? ANS. BID 2 MUST BE ACCEPTED; bid 1 = 807,469.87; bid 2 = 859,727.18 %3D
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:5. A certain manufacturing plant is being sold and was submitted for bidding. Two
bids were submitted by interested buyers. The first bid offered to pay 200,000.00
each year for 5 years, each payment being made at the beginning of each year.
The second bidder offered to pay 120,000.00 the first year, 180,000.00 the
second year and 270,000.00 each year for the next 3 years, all payments being
made at the beginning of each year. If money is worth 12 % compounded
annually, which bid should the owner of plant accept?
ANS. BID 2 MUST BE ACCEPTED; bid 1 = 807,469.87; bid 2 = 859,727.18
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