A Project Has Expected Cash Inflows,starting with Year 1,of $2,200,$2,900,$3,500,and

question 65

Multiple Choice

A project has expected cash inflows,starting with year 1,of $2,200,$2,900,$3,500,and finally in year 4,$4,000.The profitability index is 1.14 and the discount rate is 12 percent.What is the initial cost of the project?

• A)$7,899.16
• B)$8,098.24
• C)$8,166.19
• D)$9,211.06
• E)$9,250.00

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Definitions:

Information Ratio

A ratio used to measure the return of a portfolio or fund relative to its risk, often used to assess the skill of a portfolio manager.

Risk-Free Return

The theoretical return attributed to an investment with zero risk, typically associated with government bonds.

Jensen Portfolio

A portfolio evaluated using Jensen's Alpha, which measures the excess return of the portfolio over the predicted return by the CAPM model for its level of risk.

Treynor Measures

Financial metrics used to assess the returns earned on a portfolio in excess of that which could have been earned on a risk-free investment, per each unit of market risk.