A Company Facing an Interest Rate of 8% Must Choose

question 41

Multiple Choice

A company facing an interest rate of 8% must choose among projects offering the following four-year cash flows.If the company is employing the net present value criterion,which project should they choose?

• A)$25,000 in year 1;$15,000 in year 2;$10,000 in year 3;and $5,000 in year 4
• B)$5,000 in year 1;$5,000 in year 2;$20,000 in year 3;and $30,000 in year 4
• C)$15,000 in year 1;$15,000 in year 2;$15,000 in year 3;and $15,000 in year 4
• D)$5,000 in year 1;$5,000 in year 2;$25,000 in year 3;and $25,000 in year 4

---

Definitions:

Active Processing

Active Processing is the cognitive act of engaging with information in a meaningful way to ensure its storage, understanding, and retrieval from memory.

Short-term Memory

The capacity for holding a small amount of information in an active, readily available state for a short period of time.

Chunks of Information

The grouping of individual bits of information into larger, more manageable units or chunks, facilitating easier information processing and memory retention.

George Miller

A psychologist renowned for his work on cognitive psychology and for proposing the theory that the average number of objects an individual can hold in working memory is seven plus or minus two.