Suppose a Project Requires an Initial Investment of $10,000 and It

question 21

Multiple Choice

Suppose a project requires an initial investment of $10,000 and it will yield $1,500 for 8 years.The discount rate is 10%.What is the NPV of the project and should we accept or reject it?

• A) −$1,997.61; reject
• B) $1,997.61; accept
• C) −$2,000; reject
• D) $2,000; accept

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Definitions:

Horizontally Growth

Expansion strategy whereby a company grows by acquiring or merging with firms in the same industry at the same level of the supply chain.

Synergies

The additional value created by the combination of two or more companies, parts, or processes to achieve greater performance as a whole than the sum of their individual parts.

Goodwill

An intangible asset representing the excess value paid for a company over its net assets at the time of acquisition, reflecting the company's reputation, brand, and other unquantifiable attributes.

Acquisition Expense

Costs directly associated with acquiring new assets or businesses, including legal fees, due diligence costs, advisory fees, and other related expenses.