A Firm Is Evaluating a Proposal Which Has an Initial

question 18

Multiple Choice

A firm is evaluating a proposal which has an initial investment of $35,000 and has cash flows of$10,000 in year 1, $20,000 in year 2, and $10,000 in year 3. The payback period of the project is

• A) between 2 and 3 years.
• B) 1 year.
• C) between 1 and 2 years.
• D) 2 years.

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Definitions:

Price Level

The combined average cost of all goods and services manufactured within the economy.

Deflation

A decrease in the general price level of goods and services, often indicating an economy in contraction.

Aggregate

A total or sum, often used in economics to describe combined quantities like total output or income.

Frictional Unemployment

represents short-term unemployment that occurs when workers are between jobs or entering the labor force for the first time.