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Suppose an initial investment of $80 will return $30/year for three years (assume the $30 is received each year at the end of the year).
At a discount rate of 25%, this investment ________ profitable.

Respuesta :

Answer:

not profitable

Explanation:

The computation of investment profitable is shown below:-

The present value of the return is

= 30 ÷ 1.25 + 30 ÷ 1.25^2 + 30 ÷ 1.25^3

= 24 + 19.2 + 15.36

= 58.56 < 80

Therefore, the present value for the return is lower than the initial investment so, the investment is not profitable and hence the same is not to be considered

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