The Gideon Corp

question 133

Multiple Choice

The Gideon Corp. is considering making an investment in a project of $1,000,000. It expects to receive five payments of $300,000 each. Its discount rate is 8%. A table shows that the present value of an annuity of five payments of $1 each, at 8%, has a value of 4.1002. The net present value of this investment opportunity is approximately

• A) Zero
• B) 230600
• C) 500000
• D) 1230600

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Definitions:

Compounded Semiannually

The process of calculating interest on both the initial principal and the accumulated interest of previous periods on a semiannual basis.

Single Investment

Single investment refers to an investment in only one asset or security, rather than diversifying across multiple investments.

Annual Interest Rate

The Annual Interest Rate is the percentage of interest that is charged or earned on an investment, loan, or savings account over the span of a year.

Investment

The allocation of resources, such as capital, time, or assets, with the expectation of generating an income or profit.