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27-06-2024
Business

Answered

A firm can spend $1 million today and receive a return on its investment 20 years from now of $1.1 million. The firm uses a discount rate of 3%. Which is true?

a. The investment is worthwhile because it will bring in $100,000 more in revenue than it cost.
b. The investment is not worthwhile because its NPV, though positive, is too small..
c. The investment is worthwhile if the interest rate paid on retained earnings remains close to 0% (where it is today).
d. The investment is not worthwhile because its NPV is negative.

Answer :

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