Morrisey Company Has Two Investment Opportunities What Is the Net Present Value of Investment II Assuming

question 129

Multiple Choice

Morrisey Company has two investment opportunities.Both investments cost $5,500 and will provide the same total future cash inflows.The cash receipt schedule for each investment is given below: $$\begin{array} { | l | c | c | } \hline & \text { Investment I } & \text { Investment II } \\\hline \text { Period 1 } & \$ 1,000 & \$ 1,000 \\\hline \text { Period 2 } & 1,000 & 2,000 \\\hline \text { Period 3 } & 2,000 & 3,000 \\\hline \text { Period 4 } & \underline { 4,000 } & \underline { 2,000 } \\\hline \text { Total } & \underline { \$ 8,000 } & \underline { \$ 8,000 } \\\hline\end{array}$$ What is the net present value of Investment II assuming an 8% minimum rate of return? (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.Do not round your intermediate calculations.Round your answer to the nearest whole dollar.)

• A) $6,492
• B) $992
• C) $5,880
• D) $380

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Definitions:

Marginal Revenue Product

The supplementary earnings derived from utilizing an extra unit of a resource, like labor or capital.

Variable Resource

Inputs or resources used in production that change in amount with the level of output, such as labor or raw materials.

Unskilled Labor

Labor that requires no specialized skills, education, or training.

Skilled Labor

Workers who possess specialized skills, training, or knowledge that are used in the production of goods or the provision of services.