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The GAO is considering three different plans for operating a small weapons production facility.
The GAO is considering three different plans for operating a small weapons production facility. Plan A would involve
renewable 1 year contracts with payments of $1 million at the beginning of each year. Plan B would be a 2 year
contract. It would require four payments of $600,000 each, with the first one paid now and the other three at 6
month intervals. Plan C would be a 3year contract. It would entail a payment of $1.5 million now and another payment of
$0.5 million 2 years from now. Assuming that the GAO could renew any of the plans under the same conditions if it
desires to, which plan is better? Use PW analysis and a
n interest rate of 6% per year, compounded semiannually.
