A Firm Is Evaluating an Investment Proposal Which Has an Initial

question 105

Multiple Choice

A firm is evaluating an investment proposal which has an initial investment of $5,000 and cash flows presently valued at $4,000. The net present value of the investment is ________.

• A) -$1,000
• B) $0
• C) $1,000
• D) $1.25

---

Definitions:

Purely Competitive Firm

A market structure characterized by a large number of small firms, producing homogenous products, with no single firm able to influence market prices due to perfect competition.

Exchange Rate

The value at which one currency can be exchanged for another, influencing international trade and investment.

Market

A venue or mechanism where buyers and sellers interact to trade goods, services, or information.

Marginal Revenue

The increase in financial returns a business achieves by disposing of one more unit of a good or service.