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What is the minimum cash flow that could be received at the end of year three to make the following project "acceptable?" Initial cost = $100,000; cash flows at end of years one and two = $35,000; opportunity cost of capital = 10 percent.
CAPM
Capital Asset Pricing Model, a framework used to determine the theoretical expected return of an asset or portfolio, taking into account its risk relative to the overall market.
Expected Return
The anticipated profit or loss from an investment, taking into account the probability of varying outcomes.
Pure Time Value
The portion of an option's price that reflects the potential for value change based on the time remaining until its expiration.
Market Risk Premium
The bonus yield an investor projects to receive by placing their money in a risky market portfolio instead of in assets that carry no risk.
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