Question 1:

Consider a project that costs $1200 to build today and pays $300 income every year for the next four years.

1. It pays to build the project because at a positive interest rate funds invested grow through time.

2. It just pays to build the project because receipts equal costs.

3. It does not pay to build the project, because the earnings are worth less today than they are in the future.

4. One cannot determine whether the project is profitable without knowing the interest rate.

Choose the correct option.