Shenandoah Springs Company Is Considering Two Investment Opportunities Whose Cash

question 140

Multiple Choice

Shenandoah Springs Company is considering two investment opportunities whose cash flows are provided below: $\begin{array}{|l|c|c|}\hline \text { Year } & \text { Investment } A & \text { Investment B } \\\hline 0 & (\$ 15,000) & (\$ 9,000) \\\hline 1 & 5,000 & 5,000 \\\hline 2 & 5,000 & 4,000 \\\hline 3 & 5,000 & 3,000 \\\hline 4 & 4,000 & 1,000 \\\hline\end{array}$ The company's hurdle rate is 12%.What is the present value index of Investment B? (Do not round your intermediate calculations.Round your answer to two decimal points. )

• A) 1.01
• B) 1.16
• C) 0.86
• D) None of these answers is correct.

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Definitions:

Journal Entry Icon

A graphical representation or shortcut in software, used to access the feature where financial transactions are manually recorded.

Trial Balance

A bookkeeping report that lists the balances of all ledgers and accounts to check that debits equal credits in the double-entry accounting system.

Adjustments

Adjustments in accounting refer to entries made in journal accounts at the end of an accounting period to correct and allocate incomes and expenditures accurately.

Accounting System

A systematic process of recording, analyzing, summarizing, and reporting the financial transactions of a business or individual.