An Investor Is Considering a Project That Will Generate $900,000

question 68

Multiple Choice

An investor is considering a project that will generate $900,000 per year for four years. In addition to upfront costs, at the completion of the project at the end of the fifth year there will be shut-down costs of $400,000. If the cost of capital is 4.4%, based on the MIRR, at what upfront costs does this project cease to be worthwhile?

• A) $2.62 million
• B) $2.91 million
• C) $3.21 million
• D) $3.50 million

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Definitions:

Direct Stake

Interest or share in an endeavor, usually financial, directly affecting the stakeholder's welfare or benefits.

Monetary Stake

The financial interest or investment that a person or entity has in a particular outcome or venture.

Legal Realists

A school of thought in legal philosophy that views law as a means to social ends and emphasizes the role of social and economic conditions in shaping legal decisions.

Discretionary Standards

Guidelines or criteria that grant a certain degree of flexibility or judgment to the person or entity applying them, rather than prescribing a strict course of action.