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:

Negligence

A failure to exercise the care that a reasonably prudent person would exercise in similar circumstances, resulting in harm or damage.

Partnership Business

A business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Agreement.

Tort Committed

An act or omission that gives rise to injury or harm to another, resulting in legal liability.

Debts or Claims

Obligations owed by one party to another, which may be subject to repayment or compensation.