A Firm Is Considering an Investment That Will Cost $2

question 350

Multiple Choice

A firm is considering an investment that will cost $2 million today and $2 million a year from now. It will generate revenues of $1 million a year for five years, beginning two years from now. If the interest rate is 10 percent, the firm should

• A) not make the investment because the present value of the net revenues is less than the present value of the investment spending.
• B) not make the investment because the present value of the net revenues is less than $4 million.
• C) make the investment because the present value of the net revenues is greater than the present value of the investment.
• D) make the investment because the project will generate a net profit of $1 million.

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Definitions:

Alzheimer's Disease

A progressive neurological disorder characterized by memory loss, cognitive decline, and behavioral changes, resulting from neuronal damage and brain atrophy.

Acetylcholine

A neurotransmitter in both the central and peripheral nervous systems that plays an important role in muscle contraction and sensory processing.

Excitatory Neurotransmitter

A type of neurotransmitter that promotes the generation of an electrical signal called an action potential in receiving neurons.

Glutamate

An amino acid that functions as the major excitatory neurotransmitter in the vertebrate brain