A Firm Has an Opportunity to Invest in a Project

question 41

Multiple Choice

A firm has an opportunity to invest in a project that will generate $55,000 per year for the next 10 years and requires an initial investment of $300,000.The firm will need to raise equity to pay for the project.If the firm's discount rate is 11%, should they invest in this project?

• A)Yes, since the NPV is approximately $23,908
• B)Yes, since the NPV is approximately $9,500
• C)No, since the NPV is approximately -$6,100
• D)No, since the NPV is approximately -$8,500

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Definitions:

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