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:

Larger Hearts

This condition can be found in individuals with hypertension or athletes who engage in extensive endurance training, resulting in a heart that is larger than normal due to the increased workload.

ATP-CP Energy System

A short-term energy system that provides immediate energy through the breakdown of adenosine triphosphate and creatine phosphate in the muscles.

Glycolytic Energy System

A pathway for energy production that breaks down glucose for immediate energy, producing ATP anaerobically during high-intensity activities.

Glycolytic Energy System

A metabolic pathway that processes glucose for energy, significant during short-term, high-intensity exercises.