The Following Show Four Mutually Exclusive Investments

question 28

Multiple Choice

The following show four mutually exclusive investments.Which is the best investment?

• A)Initial investment: $1.1 million; Cash flow in year 1: $160,000; Annual Growth Rate: 2%; Cost of Capital: 9.0%
• B)Initial investment: $1.2 million; Cash flow in year 1: $150,000; Annual Growth Rate: 2%; Cost of Capital:7.0%
• C)Initial investment: $1.3 million; Cash flow in year 1: $160,000; Annual Growth Rate: 1%; Cost of Capital: 6%
• D)Initial investment: $1.4 million; Cash flow in year 1: $150,000; Annual Growth Rate: 2%; Cost of Capital: 8%
• E)Initial investment: $1.5 million; Cash flow in year 1: $160,000; Annual Growth Rate: 1.5%; Cost of Capital: 7%

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Definitions:

Too Many Substitutes

refers to a market condition where there are excessive alternative products or services available, potentially leading to consumer confusion and difficulty for brands to differentiate themselves.

Too Many Rivals

A market situation where there are too many competitors, often leading to reduced prices and profit margins.

Patent Protection

Legal rights granted to inventors to exclusively produce, use, or sell their invention for a certain period of time.

Market Approval

The official authorization for a product to be sold in a specific market, often referring to regulatory approval for pharmaceuticals or medical devices.