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:

Denial

A psychological defense mechanism wherein a person refuses to accept reality or facts, thus protecting themselves from uncomfortable feelings.

Repression

A defense mechanism where unwanted feelings and thoughts are unconsciously pushed out of conscious awareness.

Rationalization

A defense mechanism where individuals justify their actions or decisions with plausible but not the real reasons to avoid facing the true underlying motives.

Projection

A defense mechanism where an individual attributes their own unacceptable thoughts, feelings, or motives to another person.