Homework Answers
The max cost
= PV of all the future cash flows
= PV of annuity of 1.10
= C/r x [1 - (1 + r)-n]
= 1.10 / 7% x [1 - (1 + 7%)-5]
= $ 4.51 million
Hence, the correct answer is the second option i.e. option B.
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