Business Administratio6

Business Administratio6 - Business Administration Present...

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Business Administration Present Value Begin with the concept of "present value" Brealey and Myers begin their chapter 2 with a simple situation: an apartment building has burned down, leaving you with a check for $200,000 and a lot worth $50,000. You want to figure out what to do. Your financial advisor sets forth three options: Choice Now Next Year Cash out: $250,000 $0 Build new office building: -$100,000 $400,000 Invest in stock market (at 12% expected return): $0 $280,000 What should you do? To make things worse, you own the building in company wi th three of your relatives: Anthony Aardvark wants cash now : the more cash now, the better; he does not care about what he gets next year, but he needs money now. Cornelia Crocodile is willing to wait for money, but doesn't want to lay out more than she already has invested in the property--doesn't want to "throw good money after bad" Esmerelda Emu is far-sighted and wants the most money possible next year. Anthony states that he wants option 1--sell everything. Cornelia wants option 3--invest, but don't
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Business Administratio6 - Business Administration Present...

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