A Company Has Identified the Following Investments as Looking Promising

question 23

Multiple Choice

A company has identified the following investments as looking promising.Each requires an initial investment of $1.2 million.Which is the best investment?

• A)a perpetuity that generates a cash flow at the end of year 1 of $100,000,has a growth rate of 1.25%,and a cost of capital of 10%
• B)a perpetuity that generates a cash flow at the end of year 1 of $800,000,has a growth rate of 2.25%,and a cost of capital of 12%
• C)an investment that generates a cash flow of $400,000 at the end of each of the next five years,when the cost of capital is 6%
• D)an investment that generates a cash flow of $200,000 at the end of each of the next ten years,when the cost of capital is 6%

---

Definitions:

Cell

The basic structural, functional, and biological unit of all living organisms, acting as the building blocks of life.

Myelin Sheath

The white, fatty coating wrapped around some axons that acts as insulation and enables impulses to travel much faster.

Deterioration

refers to the process of becoming progressively worse, as in the condition of an object, structure, or health.

Multiple Sclerosis

A chronic autoimmune disorder affecting the central nervous system, characterized by damage to the myelin sheath on neurons, leading to varied and unpredictable symptoms, including physical and cognitive difficulties.