A company has an investment project that will cost $2 million today and yield a payoff of $3 million in 5 years. If the interest rate is 7%, should the firm undertake the project? Show evidence to support your answer
With a 7% interest rate, the present value of the $3 million payoff is $2,138,958.54 . Because the present value of the payoff is higher than the initial investment, the firm should undertake the project.
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Prior to financial deregulation, the store of value and medium of exchange functions of money were maintained separate among asset classes because the regulatory agencies
A) precluded the payment of interest by checking accounts. B) allowed the payment of interest by checking accounts. C) specifically prohibited money market stock funds. D) allowed the payment of interest on passbook savings accounts.
A higher desired level of capital and investment will result from ________
A) a decrease in productivity B) a fall in expected future output C) a depressed economy D) a booming economy
(I) Historically, countries with colonial settlers who planned on staying for long periods of time set up sound economic institutions. (II) Countries with harsh environments not suitable for permanent settlements resulted in colonial settlers adopting weaker and less productive economic institutions before leaving
a. I is true; II is false.
b. I is false; II is true.
c. Both I and II are true.
d. Both I and II are false.
The way it is typically drawn, what does the slope of the aggregate production function imply?
A) Diminishing marginal product of labor B) Diminishing marginal product of capital C) Increasing returns to scale D) Decreasing returns to scale