Question your company is interested in having a new

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Question

Your company is interested in having a new facility constructed. The contractor expects that it will take approximately 3 years to complete the building. The contractor has offered you three payment plans for the building. They are as follows:

Time

Plan 1

Plan 2

Plan 3

Today

$100,000

$820,000

$500,000

1 year from now

$1,100,000

$820,000

$0

2 years from now

$1,100,000

$820,000

$1,400,000

3 years from now

$1,100,000

$820,000

$1,400,000

The CFO of your company has asked you to provide recommendation concerning which payment plan to accept. What is your recommendation? Assume your weighted-average cost of capital is 10%.

Reference no: EM13376876

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