YEAR 1 2 3 4 5 6 7 8 9 1011
ENR 150 200 175 210 150 200 125 250 200 175 250
Suppose a firm is contemplating an investment with anacquisition cost of $2,100 and an economic life of 11 years.Further suppose the stream of Expected Net Revenue on thatinvestment is provided in the table above.
Please answer the next three questions based on the infoprovided above.
1. Please select the correct statement from those providedbelow:
a. Without information on the interest rate, it is impossible todetermine whether or not the investment should be adopted.
b. Without information on the PDV of the ENR stream for thisinvestment, it is impossible to determine whether or not theinvestment should be adopted.
c. Both (a) & (b) are correct.
d. This investment is not profitable and should not beundertaken.
e. This investment may or may not be profitable, depending onthe interest rate.
2. Suppose the ENR were 275 and 300 for years 10 and 11,respectively. Please select the correct statement from thoseprovided below:
a. Without information on the interest rate, it is impossible todetermine whether or not the investment should be adopted.
b. Without information on the PDV of the ENR stream for thisinvestment, it is impossible to determine whether or not theinvestment should be adopted.
c. Both (a) & (b) are correct.
d. This investment is not profitable and should not beundertaken.
3. Suppose the ENR were 200 for year 10 and r = 0. Please selectthe correct statement from those provided below:
a. This investment is profitable and should be undertaken.
b. Absent information on the PDV for this investment, it isimpossible to determine whether or not the investment should beadopted.
c. The PDV of the ENR stream for this investment is less than$2,100.
d. This investment is not profitable and should not beundertaken.
4. Suppose that new computer software for accounting andanalysis at a business has a useful life of only one year and costs$200,000 before it needs to be upgraded to a new version. Therevenue generated by this software is expected to be $250,000. Theexpected rate of return from this new computer software is:
A. 11 percent
B. 20 percent
C. 25 percent
D. 80 percent
YEAR 1 2 3 4 5 6 7 8 9 1011
ENR 150 200 175 210 150 200 125 250 200 175 250
Suppose a firm is contemplating an investment with anacquisition cost of $2,100 and an economic life of 11 years.Further suppose the stream of Expected Net Revenue on thatinvestment is provided in the table above.
Please answer the next three questions based on the infoprovided above.
1. Please select the correct statement from those providedbelow:
a. Without information on the interest rate, it is impossible todetermine whether or not the investment should be adopted.
b. Without information on the PDV of the ENR stream for thisinvestment, it is impossible to determine whether or not theinvestment should be adopted.
c. Both (a) & (b) are correct.
d. This investment is not profitable and should not beundertaken.
e. This investment may or may not be profitable, depending onthe interest rate.
2. Suppose the ENR were 275 and 300 for years 10 and 11,respectively. Please select the correct statement from thoseprovided below:
a. Without information on the interest rate, it is impossible todetermine whether or not the investment should be adopted.
b. Without information on the PDV of the ENR stream for thisinvestment, it is impossible to determine whether or not theinvestment should be adopted.
c. Both (a) & (b) are correct.
d. This investment is not profitable and should not beundertaken.
3. Suppose the ENR were 200 for year 10 and r = 0. Please selectthe correct statement from those provided below:
a. This investment is profitable and should be undertaken.
b. Absent information on the PDV for this investment, it isimpossible to determine whether or not the investment should beadopted.
c. The PDV of the ENR stream for this investment is less than$2,100.
d. This investment is not profitable and should not beundertaken.
4. Suppose that new computer software for accounting andanalysis at a business has a useful life of only one year and costs$200,000 before it needs to be upgraded to a new version. Therevenue generated by this software is expected to be $250,000. Theexpected rate of return from this new computer software is:
A. 11 percent
B. 20 percent
C. 25 percent
D. 80 percent
