Suppose a company is considering the construction of a new facility. The construction will cost $1 million today and will yield a payoff of $1.7 million in 10 years. Assuming a 5% annual interest rate, which of the following statements is correct?
A) The company should not construct the new facility because the future value of the construction cost is only $1,628,894.63.
B) The company should not construct the new facility because the future value of the construction cost is $1,783,267.42.
C) The company should construct the new facility because the present value of the future payoff is $1,092,734.95.
D) The company should construct the new facility because the present value of the future payoff is $1,043,652.53.
Correct Answer:
Verified
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