Athens Corporation has the opportunity to invest $10,000 in a subsidiary business venture that will generate a
Question:
Athens Corporation has the opportunity to invest $10,000 in a subsidiary business venture that will generate a one-time $20,000 cash payment in 3 years. Using the net present value method and assuming the market interest rate is 15%, should Athens invest in this venture?
a.) Yes, Athens should invest in the business venture. The net present value of the $20,000 cash payment is $20,000 which is greater than $10,000 the investment they would make.
b.) No, Athens should not invest in the business venture. The net present value of the $20,000 cash payment is $6,179.56 which is less than $10,000 the investment they would make.
c.) Yes, Athens should invest in the business venture. The net present value of the $20,000 cash payment is $13,150.32 which is greater than $10,000 the investment they would make.
d.) No, Athens should not invest in the business venture. The net present value of the $20,000 cash payment is $7,849.68 which is less than $10,000 the investment they would make
Managerial economics applications strategy and tactics
ISBN: 978-1439079232
12th Edition
Authors: James r. mcguigan, R. Charles Moyer, frederick h. deb harris