Suppose an Investment Will Yield $1, 000 After One Year

question 40

Multiple Choice

Suppose an investment will yield $1, 000 after one year and $2, 000 after two years.What is the present value of this investment if the discount rate is 8 percent?

• A)$2, 479.34
• B)$2, 640.60
• C)$2, 727.27
• D)$3, 000
• E)$3, 520

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Definitions:

NPVGO

Net Present Value of Growth Opportunities; an assessment method to evaluate the value of investing in new projects or equipment considering the present value of expected growth opportunities.

Investor's Return

The profit or loss made on an investment, expressed as a percentage of the initial investment amount.

Current Dividends

Refers to the dividends that are declared and paid by a company for the current fiscal period.

Perceived Risk

The level of risk that consumers or investors believe is associated with a product, investment, or decision, which may not always match the actual risk.