You Are Considering a Project with the Following Cash Flows

question 81

Multiple Choice

You are considering a project with the following cash flows: $\begin{array} { | l | l | l | } \hline \text { Year } 1 & \text { Year } 2 & \text { Year } 3 \\\hline £ 4,200 & £ 5,000 & £ 5,400 \\\hline\end{array}$
What is the present value of these cash flows, given a 3% discount rate?

• A)£13,732.41
• B)£13,812.03
• C)£14,308.08
• D)£14,941.76
• E)£14,987.69

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Definitions:

Market Risk Premium

The extra return expected by investors for holding a risky market portfolio instead of risk-free assets.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates the stock is more volatile than the market.

Diversified Portfolio

An investment strategy that spreads investments across various asset classes in order to reduce risk.

Company-specific

Refers to information, events, or characteristics that only affect a single company, not the industry as a whole or the market at large.