You are offered a four-year investment opportunity costing $450,000 today. The investment will pay $115,500 in the first year, $136,500 in the second year, $159,250 in the third year, and $180,250 in the fourth year,. Investments of comparable risk require a 14% rate of return in the financial market. Should you accept the investment opportunity and why? OA. No, because the investment's net present value is negative. OB. No, because the investment's net present value is zero. OC. Yes, because the investment's cash payments represent a total return of 31% on the $450,000 investment. OD. Yes, those cash payments look good to me because they add up to $591,500 which is more than the $450,000 investment. OE. Yes, because the investment's net present value is greater than zero.
You are offered a four-year investment opportunity costing $450,000 today. The investment will pay $115,500 in the first year, $136,500 in the second year, $159,250 in the third year, and $180,250 in the fourth year,. Investments of comparable risk require a 14% rate of return in the financial market. Should you accept the investment opportunity and why? OA. No, because the investment's net present value is negative. OB. No, because the investment's net present value is zero. OC. Yes, because the investment's cash payments represent a total return of 31% on the $450,000 investment. OD. Yes, those cash payments look good to me because they add up to $591,500 which is more than the $450,000 investment. OE. Yes, because the investment's net present value is greater than zero.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You are offered a four-year investment opportunity costing $450,000 today. The investment will pay $115,500 in the first year, $136,500 in the
second year, $159,250 in the third year, and $180,250 in the fourth year,. Investments of comparable risk require a 14% rate of return in the
financial market. Should you accept the investment opportunity and why?
OA. No, because the investment's net present value is negative.
OB. No, because the investment's net present value is zero.
OC. Yes, because the investment's cash payments represent a total return of 31% on the $450,000 investment.
OD. Yes, those cash payments look good to me because they add up to $591,500 which is more than the $450,000 investment.
OE. Yes, because the investment's net present value is greater than zero.
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