To find the maximum investment to earn a positive net present value for a project with cash flows of $100, $150, and $200, which formula would you use?

The formula that would be used to find the maximum investment to earn a positive net present value (NPV) for a project involves discounting future cash flows back to their present value. The correct answer utilizes the formula for calculating the present value of future cash flows, which brings future money back to its value in today's terms, allowing for a straightforward comparison with the investment cost.

The formula presented in the correct choice sums the present values of each cash flow. Each cash flow—$100 in the first year, $150 in the second year, and $200 in the third year—is discounted at a rate, here assumed to be 10% (or 1.1). Specifically, the formula calculates:

• The present value of the first cash flow ($100) discounted one year.

• The present value of the second cash flow ($150) discounted two years.

• The present value of the third cash flow ($200) discounted three years.

This method accurately captures the time value of money—the principle that a dollar today is worth more than a dollar in the future due to its potential earning capacity—and effectively determines the maximum amount of capital that can be invested while still yielding a positive NPV.

Other options either miscalculate the discounting process or