Gamma Corporation Is Considering an Investment of $516,000 in a Land

question 66

Multiple Choice

Gamma Corporation is considering an investment of $516,000 in a land development project.The investment will yield cash inflows of $200,000 per year for five years.The company uses a discount rate of 9%.What is the net present value of the investment? Present value of an ordinary annuity of $1:
$$\begin{array} { | l | r | r | r | } \hline &{ 8 \% } &{ 9 \% } & { 10 \% } \\\hline 1 & 0.926 & 0.917 & 0.909 \\\hline 2 & 1.783 & 1.759 & 1.736 \\\hline 3 & 2.577 & 2.531 & 2.487 \\\hline 4 & 3.312 & 3.24 & 3.17 \\\hline 5 & 3.993 & 3.89 & 3.791 \\\hline\end{array}$$

• A) $237,360
• B) $262,000
• C) $340,560
• D) $200,000

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Market Index

A statistical measure that indicates the performance of a group of stocks, representing a specific segment of the stock market.

Portfolio Standard Deviation

A statistical measure of the volatility of returns from a portfolio of assets, indicating the degree of investment risk.

Covariances

A measure that indicates the extent to which two variables change together, determining the degree of their correlation.

Expected Return

The weighted average of all possible returns for an investment, with weights being the probabilities of each outcome.