Victoria, Your Boss, Insists That Only Projects That Can Return

question 27

Multiple Choice

$$\begin{array}{l}\text { You would like to invest in the following project. }\\\begin{array} { | l | l | } \hline \text { Year } & \text { Cash Flow } \\\hline 0 & - £ 55,000 \\\hline 1 & £ 30,000 \\\hline 2 & £ 37,000 \\\hline\end{array}\end{array}$$ Victoria, your boss, insists that only projects that can return at least £1.10 in today's dollars for every £1 invested can be accepted.She also insists on applying a 10% discount rate to all cash flows.
Based on these criteria, you should:

• A)accept the project because it returns almost £1.22 for every £1 invested.
• B)accept the project because it has a positive PI.
• C)accept the project because the NPV is £2,851.
• D)reject the project because the PI is 1.05.
• E)reject the project because the IRR exceeds 10% .

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Definitions:

Stage 2 Sleep

The second phase of the sleep cycle, characterized by the body's gradual decrease in temperature and heart rate, preparing for deep sleep.

Barbiturate

An addictive depressant used to relieve anxiety or induce sleep.

Nembutal

A barbiturate used medically as a sedative and anesthetic, but also known for its use in euthanasia and assisted suicide.

Nicotine

A stimulant drug found in tobacco products that is highly addictive.