Assume That an Investment of $1000 Is Expected to Generate

question 38

Multiple Choice

Assume that an investment of $1000 is expected to generate cash flows of $500 at constant prices at the end of each of three years.Also,assume that prices are expected to increase at the rate of 10% p.a.and that the nominal rate of return is 15% p.a.What is the project's NPV?

• A)$337
• B)$373
• C)$377
• D)None of the given options.

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Definitions:

Voidable Contract

A legal agreement that may be considered invalid upon the request of one of the parties due to certain defects, such as misrepresentation or lack of capacity at the time of execution.

Statute Of Limitations

A statute that requires that certain classes of lawsuits must be brought within defined limits of time after the right to begin them accrued or the right to bring the lawsuit is lost.

Unenforceable Contract

An agreement that, due to legal deficiencies or circumstances, cannot be legally compelled by a court to be executed by the parties involved.

Executory Contract

A contract under which both parties to the agreement have obligations that remain to be fulfilled; if one side has completed its obligations, the contract is no longer executory.