Author Question: An investment should be undertaken (Read 41 times)

Mimi · **on:** Apr 19, 2019

Question 1

Refer to the information provided in Figure 11.1 below to answer the question(s) that follow.
NOTE: The MEI (marginal efficiency of investment) curve represents the demand for investment.

Refer to Figure 11.1. If the market rate of interest is < 5%, this firm's investment will total

◦ $0.
◦ < $5,000.
◦ $7,000.
◦ > $15,000.

Question 2

An investment should be undertaken

◦ if the present value of the expected income stream associated with the investment is greater than the full cost of the investment project.
◦ if the present value of the expected income stream associated with the investment is less than the full cost of the investment project.
◦ any time the present value of the expected income stream associated with the investment is positive.
◦ if the present value of the costs of the investment project exceed the present value of the expected returns from the investment project.

princessflame2016 · **Reply #1 on:** Apr 19, 2019

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