A Venture Will Provide a Net Cash Inflow of $57,000

question 12

Multiple Choice

A venture will provide a net cash inflow of $57,000 in Year 1. The annual cash flows are projected to grow at a rate of 7 percent per year forever. The project requires an initial investment of $739,000 and has a required return of 15.6 percent. The company is somewhat unsure about the growth rate assumption. At what constant rate of growth would the company just break even?

• A) 9.48 percent
• B) 9.29 percent
• C) 7.89 percent
• D) 8.49 percent
• E) 7.75 percent

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Definitions:

Mnemonic Method

A technique used to improve memory by associating new information with known patterns, images, phrases, or ideas.

Visualizing

The process of forming mental visual images.

Repeating

The act of saying or doing something again, often to practice, reinforce learning, or ensure comprehension.

Ambiguous Figures

Images or objects that can be perceived in more than one way, leading to different interpretations.