-An Investor Is Considering the Two Investments Shown Above

question 53

Multiple Choice

$\begin{array}{llllllll}\text { Time: }&\text { Year } 0 & \text { Year } 1 & \text { Year } 2 & \text { Year 3 } & \text { Year } 4 & \text { Year } 5& \text {Discount Rate }\\\text { Investment A: } & -\$ 1.5 \text { million } & \$ 300,000 & \$ 300,000 & \$ 300,000 & \$ 500,000 & \$ 500,000 & 8 \% \\\text { Investment B: } & -\$ 1.3 \text { million } & \$ 500,000 & \$ 400,000 & \$ 300,000 & \$ 200,000 & \$ 100,000 & 7 \%\end{array}$
-An investor is considering the two investments shown above. Which of the following statements about these investments is true?

• A) The investor should take investment A since it has a greater internal rate of return (IRR).
• B) The investor should take investment A since it has a greater net present value (NPV).
• C) The investor should take investment B since it has a greater net present value (NPV).
• D) Neither investment should be taken since they both have a negative net present value (NPV).

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Definitions:

Operating Temperature

The range of temperature within which a mechanical or electronic device is designed to function efficiently and safely.

Ambient Temperature

The temperature of the surrounding air or environment where a device or system operates.

Pinion Gear

A small gear that engages with a larger gear or rack, transferring motion and force in mechanical systems such as steering mechanisms.

Top Land

In an engine, the top land represents the highest section of the piston between the piston ring and the crown, impacting compression and efficiency.