You are the manager of a firm. You are given a task to decide which of three options to take to maximize the value of the firm over the next three years. The expected year-end profits are given in the following table and the company expects that the interest rates are stable at 7 percent over the next three years.Discuss the difference in the profits associated with each option. Provide an example of real-world options that might generate such profit streams.Which option has the greatest present value?OptionYear 1Year 2Year 3ARM70,000RM80,000RM90,000BRM50,000RM90,000RM100,000CRM30,000RM100,000RM115,000

Option Year1 (RM) Year2 (RM) Year3 (RM) A 70000 80000 90000 B 50000 90000 100000 C 30000…

Answered: You are the manager of a firm. You are…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You are the manager of a firm. You are given a task to decide which of three options to take to maximize the value of the firm over the next three years. The expected year-end profits are given in the following table and the company expects that the interest rates are stable at 7 percent over the next three years.

Discuss the difference in the profits associated with each option. Provide an example of real-world options that might generate such profit streams.
Which option has the greatest present value?

Option	Year 1	Year 2	Year 3
A	RM70,000	RM80,000	RM90,000
B	RM50,000	RM90,000	RM100,000
C	RM30,000	RM100,000	RM115,000

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