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1.Question:A contract is to be commenced immediately. In one year’s time it will require material EH. The material costs $7,800 now but will cost $8,800 in one year’s time. The cost of storing EH for one year is $110 payable in one year’s time.
If the contractor’s cost of capital is 10% per annum, what is the present value of using the material if the contractor wishes to maximise profit?
A.$7,999
B.$7,800
C.$7,900
D.$7,910