David Has Purchased an Investment That He Expects to Produce

question 25

Multiple Choice

David has purchased an investment that he expects to produce an annual cash flow of $3,000 for five years. He requires an 8% rate of return compounded annually. What is the maximum amount that David can pay and still earn the required rate of return?

• A) $19,008
• B) $15,000
• C) $14,764
• D) $12,936

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Definitions:

Win-Lose

A competitive situation or negotiation outcome where one party's gain is directly proportional to another's loss.

Distributive Negotiation

A negotiation strategy focused on dividing a fixed amount of resources, often resulting in a win-lose outcome.

Principled Negotiation

A negotiation strategy that involves seeking mutually beneficial solutions by focusing on interests rather than positions, emphasizing objective criteria.

Objective Standard

A benchmark or criterion that is not influenced by personal feelings, interpretations, or prejudice, applied equally to all cases.