Use the Table for the Question(s)below

question 45

Multiple Choice

Use the table for the question(s) below.
Consider the following investment alternatives:
-The highest effective rate of return you could earn on any of these investments is closest to:

• A)6.250%.
• B)6.267%.
• C)6.295%.
• D)6.310%.

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Definitions:

Depreciation Tax Shield

The tax saving achieved by a company from deducting depreciation expenses on its taxable income.

Depreciation

The allocation of the cost of an asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Taxes

Mandatory financial charges or levies imposed by a government on individuals and organizations to fund public expenditures.

Profitability Index

A financial tool that calculates the relative profitability of an investment by dividing the present value of future cash flows by the initial investment cost.