CK Corporation Can Invest $100,000 in a Project

question 60

Multiple Choice

CK Corporation can invest $100,000 in a project.After taxes, the project is expected to generate $40,000 of net income the first year and $75,000 of net income the second year.If the company uses a 10 percent discount rate to evaluate projects, what is the project's net cash flow?

• A)$15,000
• B)$1,690
• C)($1,690)
• D)($1,315)

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Definitions:

Risk-Seeking

characterizes the tendency of an individual or entity to take decisions that have a significant level of uncertainty or potential for negative outcomes in the hope of achieving higher gains.

Risk Technique

Methods or strategies used to identify, assess, and manage potential risks in a project or process to minimize negative outcomes.

Groupthink

A phenomenon where a group makes faulty or ineffective decisions for the sake of reaching a consensus, often suppressing dissenting viewpoints.

Abilene Paradox

A situation where a group of people collectively decide on a course of action that is counter to the preferences of many or all of the individuals in the group because each member mistakenly believes their own preferences are counter to the group's.