You Would Like to Invest in the Following Project Victoria,your Boss,insists That Only Projects That Can Return at Least

question 40

Multiple Choice

You would like to invest in the following project. $$\begin{array} { | l | l | } \hline \text { Year } & \text { Cad Flow } \\\hline 0 & -£ 55,000 \\\hline 1 & £ 30,000 \\\hline 2 & £ 37,000 \\\hline\end{array}$$ Victoria,your boss,insists that only projects that can return at least £1.10 in today's dollars for every £1 invested can be accepted.She also insists on applying a 10% discount rate to all cash flows.Based on these criteria,you should:

• A)accept the project because it returns almost £1.22 for every £1 invested.
• B)accept the project because it has a positive PI.
• C)accept the project because the NPV is £2,851.
• D)reject the project because the PI is 1.05.
• E)reject the project because the IRR exceeds 10% .

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Definitions:

Chi-Squared Test

A statistical analysis conducted to assess whether there's a significant disparity between the anticipated frequencies and the actual frequencies across one or multiple categories.

P-Value

A measure that indicates the probability of observing the given data, or something more extreme, if the null hypothesis is true.

Contingency Table

A table often used in statistics to display frequencies for two or more categorical variables in a tabular form.

Qualitative Variables

Variables that describe or categorize attributes or qualities, not numbers.