The Above Table Shows the Future Operating Profits from an Investment

question 19

Multiple Choice

The above table shows the future operating profits from an investment. The future operating profits are earned at the end of e the respective years.
-Refer to the table above. If the discount rate is 5 percent and the cost of the investment is $43,000, which of the following is true regarding a profit- maximizing manager?

• A)The manager should not make the investment because the net present value is negative.
• B)The manager should make the investment because the net present value is positive.
• C)The manager should make the investment because the net present value is negative.
• D)The manager should not make the investment because the net present value is positive.

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Definitions:

Adverse Selection

A situation in which one party in a transaction has more information than the other, typically leading to an inefficient market outcome.

Health Care Costs

The expenses related to maintaining the health of individuals, including medical services, medications, and treatments.

GDP

Gross Domestic Product, the total market value of all final goods and services produced within a country in a given period of time.

Health Care Expenditures

The total amount of money spent by individuals, insurance companies, and governments on health care services and products.