An energy company has recently discovered a natural gas reserve. The company can tap this reserve at a cost of $350,000 and obtain a profit of $450,000 in three years. The current market rate is 15 percent. Should the company make the investment?
A) Yes, the future value of the profit is greater than the present value of the cost.
B) No, the future value of the profit is less than the present value of the cost.
C) Yes, the present value of the profit is greater than the present value of the cost.
D) No, the present value of the profit is less than the present value of the cost.
Correct Answer:
Verified
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