A project that requires a $ 100,000 investment will yield cash flows of $50,000 in 6 months and $50,000 in one year.Assuming these are the only cash flows involved the project should be rejected for the following reasons:
I.The cost of time is not incorporated in the calculation
II.The sum of the cash inflows following the investment is equivalent to the initial investment

Question

Quizplus · Accepted Answer

The project should be rejected because both reasons I and II are valid. Reason I is valid because the cost of time is not incorporated in the calculation. Reason II is valid because the sum of the cash inflows following the investment is equivalent to the initial investment, which means that the project will not generate any profit.

A Project That Requires a $ 100,000 Investment Will Yield