The Following Investment Opportunities Are Available to an Investment Center

question 24

Essay

The following investment opportunities are available to an investment center manager: $$\begin{array} { | c | c | c | } \hline \text { Project } & \text { Initial Investment } & \text { Annual Earnings } \\\hline \text { A } & \$ 800,000 & \$ 90,000 \\\hline \text { B } & 100,000 & 20,000 \\\hline \text { C } & 300,000 & 25,000 \\\hline \text { D } & 400,000 & 60,000 \\\hline\end{array}$$ Required:
a. If the investment manager is currently making a return on investment of 16 percent, which project(s) would the manager want to pursue?
b. If the cost of capital is 10 percent and the annual earnings approximate cash flows excluding finance charges, which project(s) should be chosen?
c. Suppose only one project can be chosen and the annual earnings approximate cash flows excluding finance charges. Which project should be chosen?

---

Definitions:

Mononucleosis

An infectious disease, often called "mono," characterized by fever, sore throat, and swollen glands, commonly caused by the Epstein-Barr virus.

In-group

A social group to which a person psychologically identifies as being a member, often leading to favoritism toward group members and discrimination against non-members.

Primary Emotions

Basic emotions experienced by humans, such as happiness, sadness, fear, and anger, that are universal across cultures.

Secondary Emotions

Complex feelings that develop from primary emotions and involve a higher level of cognitive appraisal, such as guilt, shame, pride, and embarrassment.