Suppose Your Firm Is Considering Investing in a Project with the Cash

question 91

Multiple Choice

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the project are three and three and a half years, respectively. $$\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline \text { Cash Flow } & - 100,000 & 30,000 & 45,000 & 55,000 & 30,000 & 10,000 \\\hline\end{array}$$

• A)$35,995.86, reject
• B)$38,875.53, accept
• C)$138,875.53, accept
• D)$238,875.53, accept

Assess the impact of compounding frequency on investment growth or decline.

Understand the concept of total return from an investment, including income and capital gains yields.

Perform break-even analysis on investments after experiencing gains and losses.

Understand how to calculate income yield from an investment.

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Definitions:

Modified Branch

A plant structure that has evolved from a basic branch form to serve a different function, such as a cactus spine or a climbing tendril.

Whorl

A pattern in which leaves, petals, or other plant parts are arranged in a circular fashion around a central axis.

Sepals

Sepals are the often green, leaf-like parts of a flower that protect the developing bud.

Flower

Specialized reproductive shoot of a flowering plant (angiosperm).