A high-technology facilities manager, presented three different plans for running a small weapons production facility. Plan X would entail renewable one-year contract with one-million-dollar payments at the beginning of each year. Plan Y would be a two-year contract with four $600,000 payments, the first of which would be made now and the other three at 6-month intervals. Plan Z would be a three-year contract with a $1.5 million payment now and another $0.5 million payment two years from now. Assuming that the manager could renew any of the plans under the same conditions, which plan is better on the basis of a Present Worth analysis at an interest rate of 6% per year, compounded semi-annually?
A high-technology facilities manager, presented three different plans for running a small weapons production facility. Plan X would entail renewable one-year contract with one-million-dollar payments at the beginning of each year. Plan Y would be a two-year contract with four $600,000 payments, the first of which would be made now and the other three at 6-month intervals. Plan Z would be a three-year contract with a $1.5 million payment now and another $0.5 million payment two years from now. Assuming that the manager could renew any of the plans under the same conditions, which plan is better on the basis of a Present Worth analysis at an interest rate of 6% per year, compounded semi-annually?
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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A high-technology facilities manager, presented three different plans for running a small weapons production facility. Plan X would entail renewable one-year contract with one-million-dollar payments at the beginning of each year. Plan Y would be a two-year contract with four $600,000 payments, the first of which would be made now and the other three at 6-month intervals. Plan Z would be a three-year contract with a $1.5 million payment now and another $0.5 million payment two years from now. Assuming that the manager could renew any of the plans under the same conditions, which plan is better on the basis of a Present Worth analysis at an interest rate of 6% per year, compounded semi-annually?
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