Which proposal do you advise him to accept

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Reference no: EM132198811

Question: Mr. Goodman, a friend of yours, is asked to invest in the following project: installation andoperation of a facility with a life span of five years. The initial investment is $90M. It will have a netprofit of $25M/Yr the first two years and of $30M/Yr in years 3,4, and 5. At the end of year 5, it has tobe disposed of at a cost of $10M with no resale value. He also has the option of investing the samemoney in a project that will bring him $29M per year. If he has the money and his opportunity cost ofmoney is 10% (I=10%), which proposal do you advise him to accept? Why? Explain.

Reference no: EM132198811

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