Consider a Project That Costs $1 Million Today but Yields

question 23

Multiple Choice

Consider a project that costs $1 million today but yields no returns for several years.Once the project becomes productive,it yields $250,000 annually forever.Suppose two firms are examining this project,a Japanese firm with a cost of capital of 7% and a U.S.firm with a cost of capital of 13%.Approximately how many more years than the U.S.firm would the Japanese firm be willing to wait until the project starts generating cash?

• A)14 years
• B)5 years
• C)24 years
• D)3 years

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Definitions:

Villi

Small, finger-like projections that extend into the lumen of the small intestine, increasing its surface area for nutrient absorption.

Small Intestine

A part of the gastrointestinal tract following the stomach and duodenum, where most of the end absorption of nutrients and minerals from food takes place.

Digestive System

The complex system of organs and glands responsible for the breakdown and absorption of food, extracting nutrients and eliminating waste.

Gallbladder

A small organ situated beneath the liver, responsible for storing and concentrating bile.