Opie, Inc Is Considering an Eight-Year Project That Has an Initial

question 22

Multiple Choice

Opie, Inc. is considering an eight-year project that has an initial after-tax outlay or after-tax cost of $180,000. The future after-tax cash inflows from its project for years 1 through 8 are the same at $38,000. Opie uses the net present value method and has a discount rate of 11.50%. Will Opie accept the project?

• A) Opie accepts the project because the NPV is greater than$12,000.
• B) Opie accepts the project because the NPV is about $11,114.
• C) Opie rejects the project because the NPV is about -$11,114.
• D) Opie rejects the project because the NPV is less than -$12,000.

Understand and calculate the covariance and correlation between securities.

Comprehend the impact of diversification on portfolio risk.

Analyze the separation property and its implications for investment decisions.

Understand the definition and importance of sustainable development.

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Definitions:

Hurdle Rate

The minimum rate of return on an investment required by a manager or investor to proceed with the project.

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of investments.

Variance

A measure of the spread of a set of values, calculated as the average of the squared deviations from the mean.

Index Funds

Mutual funds or ETFs designed to track the components of a market index, offering broad market exposure and low operating expenses.