Question

QUESTION 49

1. Suppose that a baseball player eligible for free agent status signs a contract with a new team that promises to pay him $100,000 more than his current team for each of the next three years. Assuming the discount rate is 6 percent, what is the maximum the current costs of moving could be and still have this investment be worthwhile?

   		$251,886
   		$267,301
   		$283,019
   		$283,339

2 points   

QUESTION 50

1. Education is a good investment for an individual if

   		workers with higher levels of education tend to earn higher wages.
   		given the individual’s discount rate, the present value of the benefits of the investment are greater than or equal to the present value of the costs of the investment.
   		The internal rate of return associated with the investment is positive.
   		All of these.

Answer 1

Net present value (NPV) of an investment equals the discounted future returns minus the summation of the current and the discounted future expenditures. Where the discount rate is the annual interest rate. NPV is one of the measures that is used in choosing between two or more projects. The higher the NPV, the earlier the project should be done.

49). The correct option is (b).

$267,301

50). The correct option is (b).

given the individual’s discount rate, the present value of the benefits of the investment are greater than or equal to the present value of the costs of the investment.

Education is considered as one of the most beneficial investment for an individual.

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