Story Company Is Investing in a Giant Crane

question 17

Multiple Choice

Story Company is investing in a giant crane. It is expected to cost 6.0 million in initial investment and it is expected to generate an end of year cash flow of 3.0 million each year for three years. Calculate the NPV at 12% (approximately) .

• A) 2.4 million
• B) 1.2. million
• C) 0.80 million
• D) 0.20 million

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Definitions:

Principal-Agent Problem

A dilemma in economics where one party (the agent) is expected to act in the best interest of another party (the principal) but may have a motivation to act in their own interest instead.

Ownership

The legal right or state of having possession and control over property, which can be an object, land/real estate, intellectual property, or a corporate entity.

Control

The power to influence or direct people's behavior or the course of events.

Owners

Individuals or entities that hold legal title or possessory rights to assets or properties.