Question

Your assistant buzzes into your office and says that Murray, your stock broker, is on line 1 with a deal you can't refuse. He is offering the following future cash payments to you in return for an initial investment of $10,000.

Year one        $600

Year two        $400

Year Three    $200

You require a minimum return of 12% all investments you make. Should you accept Murray's offer?

Select one:

a. Yes. Some return is better than no return on mutually exclusive options.

b. Yes. Because the profitability index is 1.2.

c. No. Because the investment does not meet your standards and Murray is trying to rip you off.

d. Yes, the total payback exceeds the investment by $200.

Answer 1

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