Two different options for repayment of a loan

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The Financially Astute company is considering two different options for repayment of a loan. The first option requires payment of $40,000 at the end of the next four years. The second option requires $20,000 at the end of first year, $30,000 at the end of the second, $50,000 at the end of the third, $70,000 at the end of the fourth. Thus the second option requires the payment of an extra $10,000 in all, but it allows FAC to make smaller payments in the first two years. Which option should the company choose if it hurdle rate is 12 percent? 16 percent?

Reference no: EM132187911

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