Kwan Corp. has contracted with Lee Contractors to build a new building. The building is
scheduled for completion in two years. Lee has given Kwan one of three payment options:
Option #1 - Pay $2,100,000 immediately.
Option #2 - Pay $1,100,000 at the end of each year for the next two years.
Option #3 - Pay $2,500,000 at the end of the two year period.
Assume that both Lee and Kwan use a 12% discount rate in making investment decisions.
Required:
(1) Which investment option should Kwan choose?
(2) What payment option would Lee like for Kwan to choose?

Question

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The Answer of  Kwan Corp. has contracted with Lee Contractors to build a new building. The building is
scheduled for completion in two years. Lee has given Kwan one of three payment options:
Option #1 - Pay $2,100,000 immediately.
Option #2 - Pay $1,100,000 at the end of each year for the next two years.
Option #3 - Pay $2,500,000 at the end of the two year period.
Assume that both Lee and Kwan use a 12% discount rate in making investment decisions.
Required:
(1) Which investment option should Kwan choose?
(2) What payment option would Lee like for Kwan to choose?

Kwan Corp Has Contracted with Lee Contractors to Build a New