2. An investment of $60,000 resulted in uniform income of $10,000 per year for 10 years. In year 5, it is required to reinvest $20,000. What is the internal ROR? Is the investment justified if MARR=15%? First answer this question based solely on ROR vs. MARR. Confirm your answer by also performing a PW analysis. Apply Descartes and Norstrom rules to cash flows. What can you conclude?

The correct answer is option B) principal.

Explanation:

At the time of making an investment, we will have an initial amount of capital. This is called principal.

This capital money will be part of our asset, but will not include accrued profits or interests. In other words, it will be what we put into our investment before knowing if we will have profits or losses.

For example, if we start an investment with $ 10,000 and after several years we have $ 18,000, our profit will be $ 8,000 and the principal will remain $ 10,000.