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Ginny Is Considering an Investment Which Will Cost Her $120,000

question 35

Multiple Choice

Ginny is considering an investment which will cost her $120,000. The investment produces no cash flows for the first year. In the second year the cash inflow is $35,000. This inflow will increase to $55,000 and then $75,000 for the following two years before ceasing permanently. Ginny requires a 10% rate of return and has a required discounted payback period of three years. Ginny should _______ this project because the discounted payback period is ______.

Learn how changes in the labor force participation impact GDP.

Recognize the importance of avoiding multiple counting in GDP calculations.

Evaluate the limitations of GDP as a measure of economic welfare and performance.

Understand the concept of "morning morality effect" and its implications for ethical behavior.

Definitions:

Profits

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to maintain the operation.

Re-Invested

Capital or earnings that are put back into a business or investment to support growth or generate additional revenue.

Company

An entity engaged in commercial, industrial, or professional activities, either as a single individual or a group of people structured as a corporation, partnership, or sole proprietorship.

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, representing how much of the asset's value has been used up.