Question

6. (mult. Fill in the blank] If the projected profit for Lankavatara is accurate and you make an offer to Cold Mountain for it based on his value of money at 12%, then if you value money at 10% (i.e.. your MARR), comparatively speaking you will (make/lose) money compared to your value. [write out the answer) 7. [mult choice] You know about another project called Zen in Black IV. Its going to lose money. You know it. But, you decide to offer to buy it anyway. Why? a. It will make you happy. b. It will make other people happy. c. It will allow you to corner a part of a market that will prove to be valuable later. d. It comes with free trips to distant mountain retreats. e. Its utility is greater (.e., all of the above) 8. [mult choice] Zen in Black IV is going to cost you $450K based off a 5-year analysis. That same $450K could have done the following: a. Been invested in SPDR S&P 500 ETF Trust, which has a 5-year average of return of 15%/year b. Lent to your Cousin Vinny (Vincent LaGuardia "Vinny" Gambini) and he would pay you back $700K in year 5. c. Lent to your "friend" Tyler Durden who would not pay you back at all but the utility of what he does with the money would be worth $650K in year 5. d. Put it under your mattress, where it would remain nice and safe. e. All of the Above The opportunity cost for buying Zen in Black IV is:

Answer 1

Answer to Q. 6. Lose

Offer to Cloud mountain is based upon his value of money @12% which is more than my hurdle rate or MARR of 10%

Answer to Q. 7. C

Sometimes, a project is evaluated on the basis of some parameters additional to MARR if the management feels that it can help them corner a [art of the market share

Answer to Q. 8. A

Unsecured Lending to friends (options b and c) is highly risky as it involves a high risk of default in payment on principle and/ or returns. Cash put under the matteress (options d) does not generate any retuns but rather depriciates in value due to inflation