Use the Information for the Question(s)below

question 68

Multiple Choice

Use the information for the question(s) below.

-An investor has the opportunity to invest in four new retail stores. The amount that can be invested in each store, along with the expected cash flow at the end of the first year, the growth rate of the concern, and the cost of capital is shown for each case. It is assumed each investment will operate in perpetuity after the initial investment. Which investment should the investor choose?

• A)Initial investment: $100 000; Cash flow in year 1: $12 000; Growth Rate: 1.25%; Cost of Capital: 9.0%
• B)Initial investment: $90 000; Cash flow in year 1: $10 000; Growth Rate: 1.50%; Cost of Capital: 9.0%
• C)Initial investment: $80 000; Cash flow in year 1: $8 000; Growth Rate: 1.75%; Cost of Capital: 8.0%
• D)Initial investment: $60 000; Cash flow in year 1: $6 000; Growth Rate: 2.50%; Cost of Capital: 7.5%

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Definitions:

Electronic Currencies

Digital forms of money that exist electronically and can be used for transactions in place of traditional currencies.

Peer Networks

Social groups or communities where individuals interact with equals for the purpose of sharing information, resources, or support.

Currency Ownership

Refers to holding or possessing currency, both physical and digital, by individuals, businesses, or governments.

Fiat Currencies

Money that a government has declared to be legal tender, though it is not backed by a physical commodity.