Horn Corporation Is Considering Investing in a Four-Year Project

question 59

Multiple Choice

Horn Corporation is considering investing in a four-year project.Cash inflows from the project are expected to be as follows: Year 1,$2,000; Year 2,$2,200; Year 3,$2,400; Year 4,$2,600.If using a discount rate of 8%,the project has a positive net present value of $500,what was the amount of the original investment? (Ignore income taxes in this problem.) (Do not round your intermediate calculations and round the final answer to the nearest whole dollar.)

• A) $1,411.
• B) $2,411.
• C) $7,054.
• D) $8,054.

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Definitions:

Economic Efficiency

A situation where resources are allocated in a way that maximizes the production of goods and services at the lowest cost.

Market

A place or arrangement through which goods and services are exchanged between buyers and sellers.

Public Good

A commodity or service that is provided without profit to all members of a society, either by the government or by a private individual or organization.

Nonrival-in-consumption

A characteristic of goods where one person's consumption does not diminish the ability of others to use the same good.