A Firm Is Considering an Investment Project That Today Would

question 88

Multiple Choice

A firm is considering an investment project that today would cost $20,000. At the end of one year, there is a 70% probability that the investment will pay out $28,000 and a 30% probability that it will pay out $16,000. Using a 10% interest rate, what is the expected net present value of this investment?

• A) -$670.85
• B) $483.14
• C) $2,181.82
• D) $4,020.19

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Definitions:

Creative People

Individuals who have the ability to produce original and unusual ideas, or to make something new or imaginative.

Mechanistic Structure

An organizational configuration that emphasizes hierarchy, rigid departmentalization, a clear chain of command, and strict control, commonly found in highly formalized and centralized organizations.

Organic Structure

An organizational configuration characterized by flexibility, decentralized decision-making, and a lack of rigid procedures.

Innovative Ideas

Novel concepts or proposals that have the potential to bring about significant changes or improvements in a specific field.