Decision making. A group of entrepreneurs is consid- ering the purchase of an online business. Firm A pre- dicts that it will bring in a constant revenue stream of $80,000 per year for 10 yr. Firm B predicts that it will bring in a constant revenue stream of $95,000 per year for 8 yr. Based on a comparison of accumulated present values, which firm is the better buy, assuming the inter- est rate is 4.1%, compounded continuously, and both firms have the same purchase price?
Decision making. A group of entrepreneurs is consid- ering the purchase of an online business. Firm A pre- dicts that it will bring in a constant revenue stream of $80,000 per year for 10 yr. Firm B predicts that it will bring in a constant revenue stream of $95,000 per year for 8 yr. Based on a comparison of accumulated present values, which firm is the better buy, assuming the inter- est rate is 4.1%, compounded continuously, and both firms have the same purchase price?
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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Decision making. A group of entrepreneurs is consid-
ering the purchase of an online business. Firm A
dicts that it will bring in a constant revenue stream of
$80,000 per year for 10 yr. Firm B predicts that it will
bring in a constant revenue stream of $95,000 per year
for 8 yr. Based on a comparison of accumulated present
values, which firm is the better buy, assuming the inter-
est rate is 4.1%, compounded continuously, and both
firms have the same purchase price?
pre-
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