Suppose an Initial Investment of $100 Will Return $50/year for Three

question 38

Essay

Suppose an initial investment of $100 will return $50/year for three years (assume the $50 is received each year at the end of the year).Is this a profitable investment if the discount rate is 20%?

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Definitions:

Claims of Creditors

The rights of creditors to receive payment from a debtor's assets.

Journal Entry

An accounting transaction recorded in a journal such that it includes the date, accounts affected, amounts, and description of the transaction.

Debit

An accounting entry that represents either an increase in assets or expenses or a decrease in liabilities, equity, or revenue.

Capital Balances

The amount of money that partners or owners have invested in the business.