You Are Considering an Investment with the Following Cash flOws

question 146

Multiple Choice

You are considering an investment with the following cash flows. Your required return is 10%, you require a payback of three years and a discounted payback of four years. If your objective is to
Maximize your wealth, should you take this investment?

• A) Yes, because the payback is 2.5 years.
• B) Yes, because the discounted payback is four years.
• C) Yes, because both the payback and the discounted payback are less than two years.
• D) No, because the NPV is negative.
• E) No, because the project has a large negative cash flow at the end of its life.

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Definitions:

Phosphates

Inorganic chemical compounds that contain the phosphate ion, fundamental to cellular function and structural frameworks of organisms.

Cellular Respiration

Cellular respiration is the process by which cells generate ATP, the energy currency, by breaking down glucose and other food molecules in the presence of oxygen.

Glucose

A simple sugar that is an important energy source in living organisms and is a component of many carbohydrates.

ATP

Stands for adenosine triphosphate, a molecule that carries energy within cells for metabolism.