Charles Henri Is Considering Investing $36,000 in a Project That

question 47

Multiple Choice

Charles Henri is considering investing $36,000 in a project that is expected to provide him with cash inflows of $12,000 in each of the first two years and $18,000 for the following year.At a discount rate of zero percent this investment has a net present value of ____,but at the relevant discount rate of 17 percent the project's net present value is ____.

• A)$0; -$5,739
• B)$0; -$3,406
• C)$6,000; -$5,739
• D)$6,000; -$3,406
• E)$6,000; $1,897

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Definitions:

Excess Reserves

The reserves held by financial institutions in excess of the minimum reserve requirements set by central banks; these are not used for lending and can influence the money supply.

Commercial Banks

Financial institutions that provide services such as accepting deposits, providing business and personal loans, and offering basic investment products.

Required Reserves

The minimum amount of funds that a bank must hold in reserve against deposit liabilities, as mandated by central banking authorities.

Reserve Bank

A central banking institution responsible for overseeing the monetary policy, issuing currency, and regulating the banking system of a country.