Use the Information for the Question(s)below

question 68

Multiple Choice

Use the information for the question(s) below.

-An investor has the opportunity to invest in four new retail stores. The amount that can be invested in each store, along with the expected cash flow at the end of the first year, the growth rate of the concern, and the cost of capital is shown for each case. It is assumed each investment will operate in perpetuity after the initial investment. Which investment should the investor choose?

• A)Initial investment: $100 000; Cash flow in year 1: $12 000; Growth Rate: 1.25%; Cost of Capital: 9.0%
• B)Initial investment: $90 000; Cash flow in year 1: $10 000; Growth Rate: 1.50%; Cost of Capital: 9.0%
• C)Initial investment: $80 000; Cash flow in year 1: $8 000; Growth Rate: 1.75%; Cost of Capital: 8.0%
• D)Initial investment: $60 000; Cash flow in year 1: $6 000; Growth Rate: 2.50%; Cost of Capital: 7.5%

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Definitions:

Right and Wrong

Fundamental concepts relating to ethics and morality, guiding behavior as acceptable or unacceptable.

Oedipal Complex

According to Sigmund Freud, a condition that occurs during the phallic stage, when boys are presumed to develop sexual desires for their mother and see their father as a competitor for their mother’s love. The term is a reference to the character of Oedipus in the play by the Greek tragedian Sophocles.

First Year of Life

A critical period in human development marked by rapid physical and cognitive growth, along with significant emotional and psychological changes.