You inherited a huge mango garden in Rajshahi from a distantly related great grandfather. It opens two choices for you: Choice (1): Farm for mango yourself and produce mango juice. You will invest 300,000BDT to set it up. But at every year end you will earn 600,000BDT (after deduction of all the taxes etc...) for the next 5 years. Choice (2): Lease out the garden to a company. It pays you 800,000BDT at the beginning of each year for the next 3 years. But after that due to hyper production over natural limits your trees will go barren for the next 2 years and production will become negligible. Which option should you choose? Assume that yearly inflation rate is 5%.

You inherited a huge mango garden in Rajshahi from a distantly related great grandfather. It opens two choices for you: Choice (1): Farm for mango yourself and produce mango juice. You will invest 300,000BDT to set it up. But at every year end you will earn 600,000BDT (after deduction of all the taxes etc...) for the next 5 years. Choice (2): Lease out the garden to a company. It pays you 800,000BDT at the beginning of each year for the next 3 years. But after that due to hyper production over natural limits your trees will go barren for the next 2 years and production will become negligible. Which option should you choose? Assume that yearly inflation rate is 5%.

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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