23.5.A. Investment Decisions

Try these first

1. 1.

   What does NPV stand for?

   Hint

   Think about the value of cash flows.

2. 2.

   Define Payback Period.

   Hint

   It's related to how quickly you get your money back.

3. 3.

   What does NPV help determine?

   • Profitability
   • Liquidity
   • Market Share

   Hint

   Recall its role in financial assessments.

4. 4.

   True or False: The Payback Period considers the time value of money.

   • True
   • False

   Hint

   Consider what the term suggests.

5. 5.

   Evaluate an investment that requires a $5,000 upfront cost, provides a return of$1,500 each year for 4 years, and has a discount rate of 8%. What is the NPV?

   Hint

   Break down the calculation step-by-step for clarity.

6. 6.

   Consider two investments; Investment A offers a steady return of 10% but comes with higher risk, while Investment B offers a return of 6% with minimal risk. Explain which you would choose and why.

   Hint

   Reflect on personal investment goals.